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Exhibit(10)(LXII).01
VIRAGEN, INC.
REGULATION D
COMMON STOCK PRIVATE EQUITY LINE
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES
AUTHORITIES. THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE FEDERAL AND STATE SECURITIES LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE
SUCH AUTHORITIES CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SUBSCRIBER MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND
ASSESSMENT OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH
IN THE ATTACHED DISCLOSURE DOCUMENTS AS EXHIBIT J.
SEE ADDITIONAL LEGENDS AT SECTIONS 4.7 and 10.
THIS REGULATION D COMMON STOCK PRIVATE EQUITY LINE SUBSCRIPTION AGREEMENT
(this "Agreement") is made as of the 22nd day of September, 1998, by and between
VIRAGEN, INC., a corporation duly organized and existing under the laws of the
State of Delaware (the "Company"), and the undersigned subscriber executing this
Agreement ("Subscriber").
RECITALS:
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Subscriber, and the
Subscriber shall purchase from the Company, from time to time as provided
herein, shares of the Company's Common Stock, par value $0.01 per share (the
"Common Stock"), as part of an offering of Common Stock by the Company to
Subscriber, for a maximum aggregate offering amount of $20,000,000 (the "Maximum
Offering Amount"); and
WHEREAS, the solicitation of this subscription and, if accepted by the
Company, the offer and sale of the Common Stock are being made in reliance upon
the provisions of Section 4(2) and upon the provisions of Regulation D
("Regulation D"), each promulgated under the Securities Act of 1933, as amended
and the rules and regulations promulgated thereunder (the "Act"), and/or upon
such other exemption from the registration requirements of the Securities Act as
may be available with respect to any or all of the purchases of Common Stock to
be made hereunder.
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TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the recitals
above), the following terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):
"Accredited Investor" shall have the meaning set forth in Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Additional Shares" shall have the meaning ascribed to it in the
Registration Rights Agreement.
"Advance Put Notice" shall have the meaning set forth in Section 2.3.1(a),
the form of which is attached hereto as Exhibit E.
"Advance Put Notice Confirmation" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth in Section
2.3.1(a).
"Aggregate Issued Shares" equals the aggregate number of shares of Common
Stock issued to Subscriber pursuant to the terms of this Agreement or the
Registration Rights Agreement as of a given date, including Put Shares,
Additional Shares and Warrant Shares.
"Agreement" shall mean this Regulation D Common Stock Private Equity Line
Agreement.
"Automatic Equity Line Termination" shall have the meaning set forth in
Section 2.3.2.
"Bring Down Cold Comfort Letters" shall have the meaning set forth in
Section 2.3.6(b).
"Business Day" shall mean a time period beginning at the time of day in
question and ending at the same time of day on the next day normally considered
a business day.
"Calendar Month" shall mean the period of time beginning on the numeric day
in question in a calendar month (the "Numeric Day") and for Calendar Months
thereafter, beginning on the earlier of (i) the same Numeric Day of the next
calendar month or (ii) the last day of the next calendar month. Each Calendar
Month shall end on the day immediately preceding the beginning of the next
succeeding Calendar Month.
"Cap Amount" shall have the meaning set forth in Section 2.3.11.
"Cap Limit Shares" shall have the meaning set forth in Section 2.3.11.
"Capital Raising Limitations" shall have the meaning set forth in Section
6.6.1.
"Capitalization Schedule" shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit K.
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"Closing" shall mean one of the Private Equity Line Commitment Closing and
closings of a purchase and sale of Common Stock pursuant to Section 2.
"Closing Bid Price" means, for any security as of any date, the last
closing bid price for such security on The Nasdaq National Market System ("NMS")
as reported by Nasdaq, or, if the NMS is not the principal securities exchange
or trading market for such security, the last closing bid price of such security
on the principal securities exchange or trading market where such security is
listed or traded as reported by such principal securities exchange or trading
market, or if the foregoing do not apply, the last closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security, or, if no closing bid price is reported for such security, the
average of the bid prices of any market makers for such security as reported in
the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as mutually determined by the Company and the Subscriber
in this Offering. If the Company and the Subscriber in this Offering are unable
to agree upon the fair market value of the Common Stock, then such dispute shall
be resolved by an investment banking firm mutually acceptable to the Company and
the Subscriber in this offering and any fees and costs associated therewith
shall be paid by the Company.
"Common Shares" shall mean the shares of Common Stock of the Company.
"Common Stock" shall mean the common stock of the Company, par value $0.01
per share.
"Company" shall mean Viragen, Inc., a corporation duly organized and
existing under the laws of the State of Delaware.
"Company Equity Line Termination" shall have the meaning set forth in
Section 2.3.14.
"Conditions to Subscriber's Obligations" shall have the meaning as set
forth in Section 2.2.4.
"Delisting Event" shall have the meaning set forth in Section 2.12 of the
Registration Rights Agreement.
"Disclosure Documents" shall have the meaning as set forth in Section
3.2.4.
"Effective Date" shall have the meaning set forth in Section 2.3.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Extended Put Period" shall mean the period of time between the Advanced
Put Notice Date until the Put Closing Date.
"Impermissible Put Cancellation" shall have the meaning set forth in
Section 2.3.1(d).
"Individual Put Limit" shall have the meaning set forth in Section
2.3.3(a).
"Ineffective Period" shall have the meaning set forth in Section 2.10(i) of
the Registration Rights Agreement.
"Intended Put Share Amount" shall have the meaning set forth in Section
2.3.1(a).
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"Key Employee" shall have the meaning set forth in Section 5.18, as set
forth in Exhibit N.
"Legend" shall have the meaning set forth in Section 4.7.
"Major Transaction" shall mean and shall be deemed to have occurred at such
time upon any of the following events:
(i) a consolidation, merger or other business combination or event or
transaction following which the holders of Common Stock of the Company
immediately preceding such consolidation, merger, combination or event either
(i) no longer hold a majority of the shares of Common Stock of the Company or
(ii) no longer have the ability to elect the board of directors of the Company
(a "Change of Control"); provided, however, that if the other entity involved in
such consolidation, merger, combination or event is a publicly traded company
with "Substantially Similar Trading Characteristics" (as defined below) as the
Company and the holders of Common Stock are to receive solely Common Stock or no
consideration (if the Company is the surviving entity) or solely common stock of
such other entity (if such other entity is the surviving entity), such
transaction shall not be deemed to be a Major Transaction (provided the
surviving entity, if other than the Company, shall have agreed to assume all
obligations of the Company under this Agreement and the Registration Rights
Agreement). For purposes hereof, an entity shall have Substantially Similar
Trading Characteristics as the Company if the average daily dollar trading
volume of the common stock of such entity is equal to or in excess of $400,000
for the 90th through the 31st day prior to the public announcement of such
transaction;
(ii) the sale or transfer of all or substantially all of the Company's
assets; or
(iii) a purchase, tender or exchange offer made to the holders of
outstanding shares of Common Stock, such that following such purchase, tender or
exchange offer a Change of Control shall have occurred.
"Market Price" shall equal the lowest Closing Bid Price during the
applicable Pricing Period.
"Maximum Offering Amount" shall mean Twenty Million Dollars ($20,000,000).
"Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.11.
"Numeric Day" shall mean the numerical day of the month of the Subscription
Date.
"Offering" shall mean the Company's offering of the Private Equity Line
hereunder.
"Officer's Certificate" shall mean a certificate, signed by an officer of
the Company, to the effect that the representations and warranties of the
Company in this Agreement required to be true for the applicable Closing are
true and correct in all material respects and all of the conditions and
limitations set forth in this Agreement for the applicable Closing are
satisfied.
"Opinion of Counsel" shall mean, as applicable, the Private Equity Line
Commitment Opinion of Counsel, the Put Opinion of Counsel and the Purchase
Warrant Opinion of Counsel.
"Placement Agent" shall mean ▇▇▇▇▇▇ Investments LLC, d/b/a ▇▇▇▇▇▇
Institutional Finance.
"Pricing Confirmation Notice" shall mean a notice in the form attached as
Exhibit P.
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"Pricing Period" shall have the meaning set forth in Section 2.3.1(b).
"Pricing Period End Date" shall mean the last Trading Day of any Pricing
Period, as extended, if applicable.
"Principal Market" shall mean the Nasdaq National Market, the Nasdaq Small
Cap Market, the American Stock Exchange or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
"Private Equity Line" shall mean this Agreement.
"Private Equity Line Commitment Closing" shall have the meaning set forth
in Section 2.2.3.
"Private Equity Line Commitment Opinion of Counsel" shall mean an opinion
from Company's independent counsel, in the form attached as Exhibit B, or such
other form as agreed upon by the parties, as to the Private Equity Line
Commitment Closing.
"Purchase Warrant Opinion of Counsel" shall mean an opinion from Company's
independent counsel, in the form attached as Exhibit O, or such other form as
agreed upon by the parties, as to the issuance of Purchase Warrants to the
Subscriber.
"Purchase Warrants" shall have the meaning set forth in Section 2.4.2, in
the form attached hereto as Exhibit D, or such other form as agreed upon by the
parties.
"Put" shall have the meaning set forth in Section 2.3.1(b).
"Put Cancellation" shall have the meaning set forth in Section 2.3.13.
"Put Cancellation Confirmation Notice" shall have the meaning set forth in
Section 2.3.13.
"Put Cancellation Date" shall have the meaning set forth in Section 2.3.13.
"Put Cancellation Notice" shall have the meaning set forth in Section
2.3.13.
"Put Closing" shall have the meaning set forth in Section 2.3.7.
"Put Closing Date" shall have the meaning set forth in Section 2.3.7.
"Put Date" shall mean the date that is specified by the Company in any Put
Notice for which the Company intends to exercise a Put under Section 2.3.1(b).
"Put Dollar Amount" shall be determined by multiplying the Put Share Amount
specified in the Put Notice by the Put Share Price with respect to such Put
Date, subject to the Put Limitations pursuant to Section 2.3.2 below.
"Put Notice" shall have the meaning set forth in Section 2.3.1(b), the form
of which is attached hereto as Exhibit G.
"Put Notice Confirmation" shall have the meaning set forth in Section
2.3.1(b), the form of which is attached hereto as Exhibit H.
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"Put Opinion of Counsel" shall mean an opinion from Company's independent
counsel, in the form attached as Exhibit I, or such other form as agreed upon by
the parties, as to any Put Closing.
"Put Reset Price" shall mean the Post-Delisting Event Price, in the case of
a Delisting Event, and the Post-Ineffective Price, in the case of an Ineffective
Period, where Post-Delisting Event Price, Delisting Event, Post-Ineffective
Price, and Ineffective Period shall have the meanings set forth in the
Registration Rights Agreement.
"Put Share Amount" shall have the meaning as set forth Section 2.3.1(b).
"Put Share Price" shall have the meaning set forth in Section 2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are purchased by the
Subscriber pursuant to a Put.
"Registrable Securities" shall have the meaning as set forth in the
Registration Rights Agreement.
"Registration Opinion" shall have the meaning set forth in Section
2.3.6(a).
"Registration Opinion Deadline" shall have the meaning set forth in Section
2.3.6(a).
"Registration Rights Agreement" shall mean that certain registration rights
agreement entered into by the Company and Subscriber on even date herewith, in
the form attached hereto as Exhibit A, or such other form as agreed upon by the
parties.
"Registration Statement" shall have the meaning as set forth in the
Registration Rights Agreement.
"Regulation D" shall have the meaning set forth in the Recitals hereto.
"Reporting Issuer" shall have the meaning set forth in Section 6.2.
"Required Put Documents" shall have the meaning set forth in Section 2.3.5.
"Reset Cap Refund Amount" shall have the meaning set forth in Section
2.3.12.
"Risk Factors" shall have the meaning set forth in Section 3.2.4, attached
hereto as Exhibit J.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Private Equity Line, together with the Common
Stock of the Company, the Warrants and the Warrant Shares issuable pursuant to
this Private Equity Line.
"Six Month Anniversary" shall mean the date that is the same Numeric Day of
the sixth (6th) calendar month after the Subscription Date, and the date that is
the same Numeric Day of each sixth (6th) calendar month thereafter, provided
that if such date is not a Business Day, the next Business Day thereafter.
"Stockholder 20% Approval" shall have the meaning set forth in Section
6.12.
"Subscriber" shall have the meaning set forth in the preamble hereto.
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"Subscriber Due Date" shall have the meaning set forth in Section 2.3.7.
"Subscription Date" shall mean the date of the Private Equity Line
Commitment Closing.
"Supplemental Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Term" shall mean the term of this Agreement, which shall be a period of
time beginning on the date of this Agreement and ending on the Termination Date.
"Termination Date" shall mean the earlier of (i) the date that is three
years after the date of this Agreement, or (ii) the date that is thirty (30)
Trading Days after the later of (a) the Put Closing Date on which the sum of the
aggregate Put Share Price for all Put Shares equal the Maximum Offering Amount,
(b) the date that the Company has delivered a Termination Notice to the
Subscriber, and (c) the date that all of the Warrants have been exercised.
"Termination Notice" shall have the meaning set forth in Section 2.3.14.
"Trading Cushion" shall have the meaning set forth in Section 2.3.1(b).
"Trading Day" shall mean any day during which the Principal Market is open
for business.
"Transaction Documents" shall have the meaning set forth in Section 9.
"Unlegended Share Certificates" shall mean a certificate or certificates
(in denominations as instructed by Subscriber) representing the shares of Common
Stock to which the Subscriber is then entitled to receive, registered in the
name of Subscriber or its nominee (as instructed by Subscriber) and not
containing a restrictive legend, including but not limited to the Put Shares for
the applicable Put, Warrant Shares and Additional Shares.
"Use of Proceeds Schedule" shall have the meaning as set forth in Section
3.2.4, attached hereto as Exhibit L.
"Volume Evaluation Period" shall have the meaning as set forth in Section
2.3.1(b).
"VUSA Transaction" shall mean the offering of securities of the Company's
94% owned subsidiary, Viragen, USA, not involving securities of the Company for
at least the two (2) year period following the closing of such offering, to
raise up to $10,000,000 of capital for the initial capitalization of Viragen,
USA.
"Warrant Shares" shall mean the Common Stock issuable upon exercise of the
Warrants.
"Warrants" shall mean Purchase Warrants.
2. Purchase and Sale of Common Stock.
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the satisfaction of the
conditions to closing set forth in Sections 2.2 and 2.3 below, Subscriber hereby
offers to subscribe for and purchase such amounts of Common Stock and
accompanying Warrants as the Company may, in
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its sole and absolute discretion from time to time elect to issue and sell to
Subscriber according to one or more Puts pursuant to Section 2.3 below.
The parties hereto acknowledge that ▇▇▇▇▇▇ Investments, LLC, d/b/a ▇▇▇▇▇▇
Institutional Finance is acting as placement agent (the "Placement Agent") for
this Offering and will be compensated by the Company in cash, Common Stock and
warrants to purchase Common Stock. The Placement Agent has acted solely as
placement agent in connection with the Offering by the Company of the Common
Stock pursuant to this Agreement. The information and data contained in the
Disclosure Documents (as defined in Section 3.2.4) have not been subjected to
independent verification by the Placement Agent, and no representation or
warranty is made by the Placement Agent as to the accuracy or completeness of
the information contained in the Disclosure Documents.
2.2 Private Equity Line Commitment.
2.2.1 [Intentionally Left Blank].
2.2.2 [Intentionally Left Blank].
2.2.3 Private Equity Line Commitment Closing. The closing of this Agreement
(the "Private Equity Line Commitment Closing") shall be deemed to occur when
this Agreement and the Registration Rights Agreement have been executed, by both
Subscriber and the Company, and the other Conditions to Subscriber's Obligations
set forth in Section 2.2.4 below have been met.
2.2.4 Conditions to Subscriber's Obligations. As a prerequisite to the
Private Equity Line Commitment Closing and the Subscriber's obligations
hereunder, all of the following (the "Conditions to Subscriber's Obligations")
shall have been satisfied prior to or concurrently with the Company's execution
and delivery of this Agreement:
(a) the following documents shall have been delivered to the
Subscriber: (i) the Registration Rights Agreement, in the form
attached hereto as Exhibit A, or such other form as agreed upon
by the parties, (the "Registration Rights Agreement") (executed
by the Company and Subscriber), (ii) the Private Equity Line
Commitment Opinion of Counsel (signed by the Company's counsel),
and (iii) a secretary's certificate, as to (A) the resolutions
of the Company's board of directors authorizing this
transaction, (B) the Company's Certificate of Incorporation, and
(C) the Company's Bylaws;
(b) this Subscription Agreement, accepted by the Company, shall have
been received by the Subscriber;
(c) [Intentionally Left Blank].
(d) the Company's Common Stock shall be listed for and trading on
the Nasdaq National Market;
(e) other than continuing losses described in the Risk Factors below
as described in the Disclosure Documents (as described in
Section 3.2.4), as of the Closing there have been no material
adverse changes in the Company's business prospects or financial
condition since the date of the last balance sheet included in
the Disclosure Documents, including but not limited to incurring
material liabilities; and
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(f) the representations and warranties of the Company in this
Agreement are true and correct in all material respects and the
conditions to Subscriber's obligations set forth in this Section
2.2.4 are satisfied as of such Closing; and the Company shall
deliver an Officer's Certificate, signed by an officer of the
Company, to such effect to the Subscriber.
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2.3 Puts of Common Shares to the Subscriber.
2.3.1 Procedure to Exercise a Put. Subject to the Individual Put Limit, the
Maximum Offering Amount and the Cap Amount (if applicable), and the other
conditions and limitations set forth in this Agreement, at any time beginning on
the date on which the Registration Statement is declared effective by the SEC
(the "Effective Date"), the Company may, in its sole and absolute discretion,
elect to exercise one or more Puts according to the following procedure:
(a) at least ten (10) Trading Days prior to any intended Put Date (unless
otherwise agreed in writing by the Subscriber), the Company shall deliver
advance written notice (the "Advance Put Notice," the form of which is attached
hereto as Exhibit E, the date of such Advance Put Notice being the "Advance Put
Notice Date") to Subscriber stating the Put Date for which the Company shall,
subject to the limitations and restrictions contained herein, exercise a Put and
stating the number of shares of Common Stock for which the Company shall
exercise a Put (the "Intended Put Share Amount"). Notwithstanding the above, if
more than two (2) Calendar Months have passed since the date of the previous Put
Closing, the Company shall deliver the Advance Put Notice at least twenty (20)
Trading Days prior to any intended Put Date. In order to effect delivery of the
Advance Put Notice, the Company shall (i) send the Advance Put Notice by
facsimile on such date so that such notice is received by the Subscriber by 6:00
p.m., New York, NY time, and (ii) surrender such notice on such date to a common
courier for overnight delivery to the Subscriber (or two (2) day delivery in the
case of a Subscriber residing outside of the U.S.). Upon receipt by the
Subscriber of a facsimile copy of the Advance Put Notice, the Subscriber shall,
within two (2) Business Days, send, via facsimile, a confirmation of receipt
(the "Advance Put Notice Confirmation," the form of which is attached hereto as
Exhibit F) of the Advance Put Notice to Company specifying that the Advance Put
Notice has been received and affirming the intended Put Date and the Intended
Put Share Amount;
(b) on the Put Date specified in the Advance Put Notice, the Company
shall deliver written notice (the "Put Notice," the form of which is
attached hereto as Exhibit G, the date of such Put Notice being the "Put Date")
to Subscriber stating (i) the Put Date, (ii) the "Put Share Amount" as specified
in the Put Notice (such exercise a "Put"); provided, however, that the Put Share
Amount specified by the Company in the Put Notice shall be equal to the Intended
Put Share Amount (as defined in Section 2.3.3 (a)), unless the Put Share Amount
must be restricted to the Individual Put Limit pursuant to Section 2.3.3 (a)
below, and (iii) the length of the Volume Evaluation Period and the Pricing
Period, each as defined below; provided, further, that the Company shall not
send a Put Notice unless at least twenty (20) Trading Days, not including any
Trading Day for which the Registration Statement is ineffective or subject to an
Ineffective Period, have elapsed (the "Trading Cushion") since the last Put Date
for which a Put was closed. In order to effect delivery of the Put Notice, the
Company shall (i) send the Put Notice by facsimile on the Put Date so that such
notice is received by the Subscriber by 6:00 p.m., New York, NY time, and (ii)
surrender such notice on the Put Date to a common courier for overnight delivery
to the Subscriber (or two (2) day delivery in the case of a Subscriber residing
outside of the U.S.). Upon receipt by the Subscriber of a facsimile copy of the
Put Notice, the Subscriber shall, within two (2) Business Days, send, via
facsimile, a confirmation of receipt (the "Put Notice Confirmation," the form of
which is attached hereto as Exhibit H) of the Put Notice to Company specifying
that the Put Notice has been received and affirming the Put Date and the Put
Share Amount;
For purposes hereof, the "Volume Evaluation Period" shall equal the
minimum period of consecutive Trading Days, ending on the Trading Day
immediately preceding the Put Date, for which the aggregate daily reported
trading volume in the outstanding Common Stock on the Company's Principal Market
equals or exceeds two (2) times the Put Share Amount, provided
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that the Volume Evaluation Period shall not exceed ten (10) Trading Days. The
"Pricing Period," unless otherwise shortened or extended under the terms of this
Agreement, shall equal a period of "X" Trading Days immediately following the
applicable Put Date, where "X" equals two (2) multiplied by the number of
Trading Days in the Volume Evaluation Period; provided that if a Put
Cancellation Notice has been delivered to the Subscriber after the Put Date, the
Pricing Period for such Put shall end at 6:00 p.m., New York City time, on the
Put Cancellation Date.
(c) the "Put Share Price" shall equal the lesser of (A) 87.5% of the
Market Price for such Put or (B) difference of (i) the Market Price for
such Put minus (ii) $0.225; and
(d) on or before the Put Date for such Put, the Company shall deliver the
Required Put Documents (as defined in Section 2.3.5 below) to the
Subscriber (or to an agent of Subscriber, if Subscriber so directs). Unless
otherwise specified by the Subscriber, the Put Shares of Common Stock shall be
transmitted electronically pursuant to such electronic delivery system as the
Subscriber shall request; otherwise delivery shall be by physical certificates.
If the Company has not delivered all of the Required Put Documents to the
Subscriber on or before the Put Date, the Subscriber, at its option, may cancel
the Put or may agree to extend the date that the Required Put Documents are
required to be delivered by five (5) Business Days (the "Extended Delivery
Date"), in which case the Pricing Period is extended by five (5) Trading Days.
If the Company has not delivered all of the Required Put Documents to the
Subscriber on or before the Extended Delivery Date (if applicable), the Put is
automatically canceled (an "Impermissible Put Cancellation") and, unless the Put
was otherwise canceled in accordance with the terms of Section 2.3.13, the
Company shall pay the Subscriber $15,000 for its reasonable due diligence
expenses incurred in preparation for the canceled put and the Company may
deliver an Advance Put Notice for the subsequent Put no sooner than ten (10)
Business Days after the date that such Put was canceled.
2.3.2 Termination of Right to Put. The Company's right to require the
Subscriber to purchase any subsequent Put Shares shall terminate permanently (an
"Automatic Equity Line Termination"), unless waived in writing by the
Subscriber, upon the occurrence of any of the following:
(a) the Company shall not exercise a Put or any Put thereafter if, at
any time, either the Company or any director or executive officer of the
Company has engaged in a transaction or conduct that gives rise to (i) a
Securities Exchange Commission enforcement action, or (ii) a civil judgment or
criminal conviction for fraud or misrepresentation, or for any other offense
that, if prosecuted criminally, would constitute a felony under applicable law;
(b) the Company shall not exercise a Put or any Put thereafter, on any
date after (i) any Ineffective Period or Delisting Event, both as defined in the
Registration Rights Agreement, that lasts for four (4) consecutive months, or
(ii) after a cumulative time period including both Ineffective Periods and
Delisting Events that last for an aggregate of four (4) months;
(c) the Company shall not exercise a Put or any Put thereafter if at any
time the Company has filed for and/or is subject to any bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors instituted by or against
the Company or any subsidiary of the Company; and
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(d) the Company shall not exercise a Put after the sooner of (i) the
date that is three (3) years after the date of this Agreement, or (ii) the Put
Closing Date on which the aggregate of the Put Dollar Amount for all Puts equal
the Maximum Offering Amount.
2.3.3 Put Limitations. The Company's right to exercise a Put shall be
limited as follows, unless waived in writing by the Subscriber:
(a) the Company shall not exercise any Put where the aggregate Put Share
Amount with respect to all Subscribers would exceed the Individual Put Limit in
effect on the Put Date. The "Individual Put Limit" shall equal one half of the
aggregate daily reported trading volume in the outstanding Common Stock reported
on the Company's Principal Market in a maximum Volume Evaluation Period of ten
(10) Trading Days, ending on the Trading Day immediately preceding the Put Date;
(b) notwithstanding the amount of any Put, the Subscriber shall not be
obligated to purchase any additional Put Shares once the aggregate Put Dollar
Amount paid by Subscriber equals the Maximum Offering Amount;
(c) the Subscriber shall not be obligated to acquire and pay for the
Put Shares with respect to any Put for which the Company has announced a
subdivision or combination, including a reverse split, of its Common Stock or
has subdivided or combined its Common Stock during the Extended Put Period;
(d) the Subscriber shall not be obligated to acquire and pay for the
Put Shares with respect to any Put for which the Company has paid a dividend of
its Common Stock or has made any other distribution of its Common Stock during
the Extended Put Period;
(e) the Subscriber shall not be obligated to acquire and pay for the
Put Shares with respect to any Put for which the Company has made, during the
Extended Put Period, a distribution of all or any portion of its assets or
evidences of indebtedness to the holders of its Common Stock;
(f) the Subscriber shall not be obligated to acquire and pay for the
Put Shares with respect to any Put for which a Major Transaction has occurred
during the Extended Put Period;
2.3.4 Conditions Precedent to the Right of the Company to Deliver an
Advance Put Notice or a Put Notice and the Obligation of the Subscriber to
Purchase Put Shares. The right of the Company to deliver an Advance Put Notice
or a Put Notice and the obligation of the Subscriber hereunder to acquire and
pay for the Put Shares incident to a Closing is subject to the satisfaction, on
(i) the date of delivery of such Advance Put Notice or Put Notice and (ii) the
applicable Put Closing Date, of each of the following conditions, unless waived
in writing by the Subscriber:
(a) the Company's Common Stock shall be listed for and
actively trading on the Nasdaq National Market or New
York Stock Exchange and the Put Shares shall be so
listed, and to the Company's knowledge there is no
notice of any suspension or delisting with respect to
the trading of the shares of Common Stock on such
market or exchange;
(b) the Company shall have satisfied any and all
obligations pursuant to the Registration Rights
Agreement, including, but not limited to, the filing
of the Registration Statement with the SEC with
respect to the resale of all Registrable Securities
and the requirement that the Registration Statement
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shall have been declared effective by the SEC for the
resale of all Registrable Securities and the Company shall
have satisfied and shall be in compliance with any and all
obligations pursuant to the Subscription Agreement and the
Warrants;
(c) there have been no material adverse changes in the
Company's business prospects or financial condition
(defined below in Section 5.2), including but not
limited to incurring material liabilities, except as
disclosed in the SEC documents filed by the Company
since the date of this Agreement;
(d) the representations and warranties of the Company are
true and correct in all material respects as if made
on such date and the conditions to Subscriber's
obligations set forth in this Section 2.3.4 are
satisfied as of such Closing, and the Company shall
deliver a certificate, signed by an officer of the
Company, to such effect to the Subscriber;
(e) the Company shall have reserved for issuance a
sufficient number of Common Shares for the purpose of
enabling the Company to satisfy any obligation to
issue Common Shares pursuant to any Put and to effect
exercise of the Warrants;
(f) the Registration Statement is not subject to an
Ineffective Period as defined in the Registration
Rights Agreement, the prospectus included therein is
current and deliverable, and to the Company's
knowledge there is no notice of any investigation or
inquiry concerning any stop order with respect to the
Registration Statement;
(g) if the Aggregate Issued Shares after the Closing of
the Put would exceed the Cap Amount, the Company
shall have obtained the Stockholder 20% Approval as
specified in Section 6.12; and
(h) there are no disputes between the Company and the
Subscriber regarding any due diligence review
(including but not limited to the Due Diligence
Review defined below) by the Subscriber or regarding
the completeness or accuracy of the prospectus for
resale of the Put Shares.
2.3.5 Documents Required to be Delivered on the Put Date as Conditions to
Closing of any Put. The Closing of any Put and Subscriber's obligations
hereunder shall additionally be conditioned upon the delivery to the Subscriber
of each of the following (the "Required Put Documents") on or before the
applicable Put Date, unless waived or extended in writing by the Subscriber:
(a) Unlegended Share Certificates representing the Common Stock for which
the Subscriber has subscribed;
(b) the following documents: Put Opinion of Counsel, Officer's Certificate,
Put Notice, any required Registration Opinion, and any report required under
Section 2.3.6 or Section 2.6;
(c) current Risk Factors; and
(d) all documents, instruments and other writings required to be delivered
on or before the Put Date pursuant to any provision of this Agreement in order
to implement and effect the transactions contemplated herein.
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2.3.6 Accountant's Letter and Registration Opinion.
(a) The Company shall have caused to be delivered to the Subscriber, (i) to
the extent provided by Section 2.6, and (ii) on the date that is three (3)
Trading Days prior to each Put Date (the "Registration Opinion Deadline"), an
opinion of the Company's independent counsel, in substantially the form of
Exhibit R (the "Registration Opinion"), addressed to the Subscriber stating,
inter alia, that no facts ("Material Facts") have come to such counsel's
attention that would cause it to believe that any of the following: the
Registration Statement, any Supplemental Registration Statement, as applicable
(as each may be amended, if applicable), and any related prospectuses, contains
an untrue statement of material fact or omits a material fact required to make
the statements contained therein, not misleading or that the underlying
Prospectus (if applicable, as so amended or supplemented) contains an untrue
statement of material fact or omits a material fact required to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading. If a Registration Opinion cannot be delivered by the
Company's independent counsel to the Subscriber on the Registration Opinion
Deadline due to the existence of Material Facts, the Company shall promptly
notify the Subscriber and promptly revise each of the Registration Statement and
any Supplemental Registration Statement, as applicable, and deliver such
Registration Opinion and updated prospectus as soon as possible thereafter. If
at any time after a Put Notice shall have been delivered to Subscriber but
before the Put Closing, the Company acquires knowledge of such Material Facts or
any Ineffective Period occurs, the Company shall promptly notify the Subscriber
and shall deliver a Put Cancellation Notice to the Subscriber pursuant to
Section 2.3.13 by facsimile and overnight courier by the end of that Trading
Day. The Company's independent counsel shall also deliver to the Subscriber on
the Effective Date opinions in form and substance satisfactory to the Subscriber
addressing, among other things, corporate matters and the exemption from
registration under the Securities Act of the issuance of the Common Stock by the
Company to the Subscriber under this Agreement.
(b) (i) the Company shall engage its independent auditors to perform the
procedures in accordance with the provisions of Statement on Auditing Standards
No. 71, as amended, as agreed to by the parties hereto, and reports thereon (the
"Bring Down Cold Comfort Letters") as shall have been reasonably requested by
the Subscriber with respect to certain financial information contained in the
Registration Statement and shall have delivered to the Subscriber a report
addressed to the Subscriber, on the date that is three (3) Trading Days prior to
each Put Date.
(ii) in the event that the Subscriber shall have requested delivery of an
"agreed upon procedures" report pursuant to Section 2.6, the Company shall
engage its independent auditors to perform certain agreed upon procedures and
report thereon as shall have been reasonably requested by the Subscriber with
respect to certain financial information of the Company and the Company shall
deliver to the Subscriber a copy of such report addressed to the Subscriber. In
the event that the report required by this Section 2.3.6(b) cannot be delivered
by the Company's independent auditors, the Company shall, if necessary, promptly
revise the Registration Statement and the Company shall not deliver a Put Notice
until such report is delivered.
(c) in addition to the above, anytime that a Registration Opinion has not
been given to the Subscriber during the prior three (3) Calendar Months, and the
Subscriber then holds Common Stock issued pursuant to this Agreement valued at
$250,000 or more, based upon the Closing Bid Price on the day in question, the
Subscriber may require the Company to cause a Registration Opinion and a Bring
Down Cold Comfort Letter to be delivered to the Subscriber. The Company shall
provide such documents to the Subscriber within five (5) Trading Days of the
Subscriber's written request.
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2.3.7 Put Closing Mechanics. On or before the end of the Trading Day
immediately following the Pricing Period End Date for each Put, the Company
shall deliver to the Subscriber a Pricing Confirmation Notice in the form of
Exhibit P attached hereto, setting forth the Put Share Price and the Put Dollar
Amount for such Put.
On or before the fifth (5th) Trading Day after a Pricing Period End Date
(the "Subscriber Due Date"), the Subscriber shall deliver to the Company the Put
Dollar Amount in the manner specified in Section 8 below for such Put Shares as
specified in the Put Notice; provided, however, if the Subscriber does not
deliver to the Company the Put Dollar Amount for such Put on or before the
Subscriber Due Date, then the Subscriber shall pay to the Company, in addition
to the Put Dollar Amount, an amount (the "Late Payment Amount") at a rate of X%
per month, accruing daily, multiplied by such Put Dollar Amount, where "X"
equals one percent (1%) for the first month following the date in question, and
increases by an additional one percent (1%) for each month that passes after the
date in question, up to a maximum of five percent (5%). The closing (each a "Put
Closing") for each Put shall occur on the date that both (i) the Company has
delivered to the Subscriber all Required Put Documents, including any Additional
Shares required to be issued to the Subscriber, if applicable, and (ii) the
Subscriber has delivered to the Company such Put Dollar Amount and any Late
Payment Amount, if applicable (each a "Put Closing Date").
2.3.8 Extension of Pricing Period Due to Press Release. In the event that
the Company makes a public announcement or press release anytime during the five
(5) Trading Days immediately preceding the Pricing Period End Date for any Put,
the Pricing Period will be extended through the fifth (5th) Trading Day after
such public announcement or Press Release.
2.3.9 [Intentionally Left Blank].
2.3.10 Limitation on Short Sales. The Subscriber and its Affiliates shall
not engage in short sales of the Company's Common Stock; provided, however, that
the Subscriber may enter into any short sale or other hedging or similar
arrangement it deems appropriate with respect to Put Shares after it receives an
Advance Put Notice with respect to such Put Shares so long as such sales or
arrangements do not involve more than the number of such Put Shares specified in
the Advance Put Notice (or, a good faith estimate of the number of Put Shares,
if an exact number of shares is not specified in the Advance Put Notice).
2.3.11 Cap Amount. Unless the Company has obtained Stockholder 20% Approval
as set forth in Section 6.12 or unless otherwise permitted by Nasdaq, in no
event shall the Aggregate Issued Shares exceed the maximum number of shares of
Common Stock (the "Cap Amount") that the Company can, without stockholder
approval, so issue pursuant to Nasdaq Rule 4460(i)(1)(d)(ii) (or any other
applicable Nasdaq Rules or any successor rule) (the "Nasdaq 20% Rule"). In the
event the Company is prohibited from issuing the full amount of any Additional
Shares as a result of the operation of this Section 2.3.11, the Company shall
issue such number of shares of Common Stock as are available without exceeding
the Cap Amount (the "Cap Limit Shares") to the Subscriber as partial
consideration for its obligation to issue the Additional Shares and shall pay
the Subscriber the refund amount as specified in Section 2.3.12 below.
2.3.12 Refund due to Cap Amount. In the event the Company is prohibited
from issuing the full amount of the Additional Shares as a result of the
operation of Section 2.3.11, the Company shall refund to the Subscriber a dollar
amount (the "Reset Cap Refund Amount") equal to the product of (a) the
difference of (i) the number of Additional Shares required to be issued by the
Company, minus (ii) the number of the Cap Limit Shares, times (b) the applicable
Put Reset Price. On or before the third (3rd) Business Day following the
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date that such Additional Shares were required to be issued, the Company shall
deliver to the Subscriber Unlegended Share Certificates representing the Cap
Limit Shares registered in the name of Subscriber or its nominee (as instructed
by Subscriber) and free of restrictive legends and the Reset Cap Refund Amount.
2.3.13 Put Cancellation at Company's Option.
(a) Mechanics of Put Cancellation. Subject to the limitations below, at any
time from the Advance Put Notice Date through the last day of the Pricing
Period, the Company may cancel a Put (a "Put Cancellation"), in whole or in
part, by delivering written notice to the Subscriber (the "Put Cancellation
Notice"), attached as Exhibit Q, by facsimile and overnight courier. The "Put
Cancellation Date" shall be the date that the Put Cancellation Notice is first
received by the Subscriber, if such notice is received by the Subscriber by 6:00
p.m., New York, NY time, and shall be the following date, if such notice is
received by the Subscriber after 6:00 p.m., New York, NY time.
(b) Limitations on Put Cancellation. The Company may not deliver a Put
Cancellation Notice unless (i) the Company discovers the existence of Material
Facts or any Ineffective Period occurs after a Put Date but before the Put
Closing (in which case Put Cancellation is mandatory), or (ii) the Closing Bid
Price on the Put Cancellation Date is less than eighty percent (80%) of the
Closing Bid Price on the applicable Advance Put Notice Date. Notwithstanding any
Put Cancellation Notice, the Put shall remain effective with respect to the
number of shares of Common Stock sold by the Subscriber from the Advance Put
Notice Date through the close of trading on the Put Cancellation Date and the
Pricing Period shall end on the Put Cancellation Date. The Company shall be
obligated, upon canceling any Put, to issue to the Subscriber Unlegended Share
Certificates representing a number of shares of Common Stock equal to the number
of shares of Common Stock sold, if any, by the Subscriber from the Advance Put
Notice Date through the close of trading on the Put Cancellation Date.
(c) Put Cancellation Notice Confirmation. Upon receipt by the Subscriber of
a facsimile copy of the Put Cancellation Notice, the Subscriber shall promptly
send, via facsimile, a confirmation of receipt (the "Put Cancellation Notice
Confirmation") of the Put Cancellation Notice to Company specifying that the Put
Cancellation Notice has been received and affirming the Put Cancellation Date
and the number of shares of Common Stock that have been sold by the Subscriber
from the Advance Put Notice Date through the close of trading on the Put
Cancellation Date.
2.3.14 Private Equity Line Cancellation. The Company may terminate (a
"Company Equity Line Termination") its right to initiate future Puts by
providing written notice ("Equity Line Termination Notice") to the Subscriber,
by facsimile and overnight courier, at any time, provided that such termination
shall have no effect on the parties' other rights and obligations under this
Agreement, the Registration Rights Agreement or the Warrants. Notwithstanding
the above, any cancellation occurring during an Extended Put Period is governed
by Section 2.3.13.
2.4 Warrants.
2.4.1 [Intentionally Omitted].
2.4.2 Purchase Warrants. On each Six Month Anniversary of the Subscription
Date, the Company shall issue to the Subscriber a warrant ("Purchase Warrant")
to purchase a number of shares of Common Stock equal to 10% of the number of Put
Shares issued to Subscriber during the preceding six (6) Calendar Months. Each
Purchase Warrant shall be exerciseable at a price (the "Purchase Warrant
Exercise Price") which shall equal 108% of the
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lowest Closing Bid Price for the ten (10) trading days immediately preceding the
applicable Six Month Anniversary. Each Purchase Warrant shall be immediately
exercisable at the Purchase Warrant Exercise Price, and shall have a term
beginning on the date of issuance and ending on date that is five (5) years
thereafter. The Warrant Shares shall be registered for resale pursuant to the
Registration Rights Agreement. Concurrently with the issuance and delivery of
the Purchase Warrant to the Subscriber, the Company shall deliver to the
Subscriber a Purchase Warrant Opinion of Counsel (signed by the Company's
independent counsel).
2.5 Subscriber's Right to Defer Receipt. If at any time the Subscriber
would have the right to receive shares of Common Stock from the Company,
including, without limitation, by reason of Section 2.3 (Put) and/or the right
to receive a shares of Common Stock upon exercise of a Warrant or Warrants by
reason of Section 2.4 hereof, and as a result of receiving such additional
shares of Common Stock or such Warrants the Subscriber would be deemed to be,
after taking into account Common Shares previously acquired from the Company,
Warrant Shares deemed to be beneficially owned pursuant to ownership of the
Warrants, and any other shares of Common Stock of the Company deemed to be
beneficially owned by the Subscriber, the beneficial owner (within the meaning
of Section 13(d) of the Exchange Act) of 9.9% of the Common Stock of the
Company, the Subscriber may elect to defer receipt of all or any portion of such
Common Shares from the Company and/or defer receipt of all or any portion of
such Warrant or Warrants, by sending a notice to the Company of such election.
Such election shall not affect the Subscriber's obligation to pay for Put
Shares, as if such election had not been made, nor shall it affect (other than
by way of deferral, as set forth herein) the Subscriber's absolute and
unconditional right to receive the shares of Common Stock and/or Warrants to
which it was otherwise entitled. In the event the Subscriber makes such
election, (i) it may waive such election, in whole or in part, at any time
effective on sixty one (61) days' prior notice to the Company and (ii) may waive
it effective immediately upon notice to the Company in the event of the
announcement by the Company or any third party of a Major Transaction. The
Company shall deliver the shares and/or Warrants to which the Subscriber is
entitled on the effective date of the waiver in the case of clause (i) above,
and within three (3) Trading Days of the date of the waiver notice in the case
of a waiver pursuant to clause (ii) above.
2.6 Due Diligence Review. The Company shall make available for inspection
and review by the Subscriber (the "Due Diligence Review"), advisors to and
representatives of the Subscriber (who may or may not be affiliated with the
Subscriber and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the Subscriber
pursuant to the Registration Statement, any Supplemental Registration Statement,
or amendments or supplements thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Documents and other filings with the SEC,
and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information reasonably
requested by the Subscriber or any such representative, advisor or underwriter
in connection with such Registration Statement (including, without limitation,
in response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Subscriber
and such representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence with
respect to the Company and the accuracy of the Registration Statement.
2.6.1 Treatment of Nonpublic Information. The Company shall not disclose
nonpublic information to the Subscriber, advisors to or representatives of the
Subscriber unless prior to disclosure of such information the Company identifies
such information as being nonpublic information and provides the Subscriber,
such advisors and representatives with the opportunity to accept or refuse to
accept such nonpublic information for review. The Company may, as a condition to
disclosing any nonpublic information hereunder, require the Subscriber's
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advisors and representatives to enter into a confidentiality agreement
(including an agreement with such advisors and representatives prohibiting them
from trading in Common Stock during such period of time as they are in
possession of nonpublic information) in form reasonably satisfactory to the
Company and the Subscriber.
Nothing herein shall require the Company to disclose nonpublic
information to the Subscriber or its advisors or representatives, and the
Company represents that it does not disseminate nonpublic information to any
investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Subscriber and, if
any, underwriters, of any event or the existence of any circumstance (without
any obligation to disclose the specific event or circumstance) of which it
becomes aware, constituting nonpublic information (whether or not requested of
the Company specifically or generally during the course of due diligence by and
such persons or entities), which, if not disclosed in the Prospectus included in
the Registration Statement, would cause such Prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements therein, in light of the circumstances in which they were
made, not misleading. Nothing contained in this Section 2.6 shall be construed
to mean that such persons or entities other than the Subscriber (without the
written consent of the Subscriber prior to disclosure of such information) may
not obtain nonpublic information in the course of conducting due diligence in
accordance with the terms of this Agreement; provided, however, that in no event
shall the Subscriber's advisors or representatives disclose to the Subscriber
the nature of the specific event or circumstances constituting any nonpublic
information discovered by such advisors or representatives in the course of
their due diligence without the written consent of the Subscriber prior to
disclosure of such information.
2.6.2 Disclosure of Misstatements and Omissions. The Subscriber's advisors
or representatives shall make complete disclosure to the Subscriber's counsel of
all events or circumstances constituting nonpublic information discovered by
such advisors or representatives in the course of their due diligence upon which
such advisors or representatives form the opinion that the Registration
Statement contains an untrue statement of a material fact or omits a material
fact required to be stated in the Registration Statement or necessary to make
the statements contained therein, in the light of the circumstances in which
they were made, not misleading. Upon receipt of such disclosure, the
Subscriber's counsel shall consult with the Company's independent counsel in
order to address the concern raised as to the existence of a material
misstatement or omission and to discuss appropriate disclosure with respect
thereto; provided, however, that such consultation shall not constitute the
advice of the Company's independent counsel to the Subscriber as to the accuracy
of the Registration Statement and related Prospectus.
2.6.3 Procedure if Material Facts are Reasonably Believed to be Untrue or
are Omitted. In the event after such consultation the Subscriber's counsel
reasonably believes that the Registration Statement contains an untrue statement
or a material fact or omits a material fact required to be stated in the
Registration Statement or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading,
(a) the Company shall file with the SEC an amendment to the Registration
Statement responsive to such alleged untrue statement or omission and provide
the Subscriber, as promptly as practicable, with copies of the Registration
Statement and related Prospectus, as so amended,
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(b) if the Company disputes the existence of any such material misstatement
or omission, (i) the Company's independent counsel shall provide the
Subscriber's counsel with a Registration Opinion and (ii) in the event the
dispute relates to the adequacy of financial disclosure and the Subscriber shall
reasonably request, the Company's independent auditors shall provide to the
Company a letter outlining the performance of such "agreed upon procedures" as
shall be reasonably requested by the Subscriber and the Company shall provide
the Subscriber with a copy of such letter, or
(c) if the Company disputes the existence of any such material misstatement
or omission, and the dispute relates to the timing of disclosure of a material
event and the Company's independent counsel is unable to provide the opinion
referenced in clause (b)(i) above to the Subscriber, then this Agreement shall
be suspended for a period of up to thirty (30) days, at the end of which, if the
dispute still exists between the Company's independent counsel and the
Subscriber's counsel, the Company shall either (i) amend the Registration
Statement as provided above, (ii) provide to the Subscriber the Company's
independent counsel opinion and a copy of the letter of the Company's
independent auditors referenced above, or (iii) the obligation of the Subscriber
to purchase shares of Common Stock pursuant to this Agreement shall terminate.
3. Representations, Warranties and Covenants of Subscriber. Subscriber
hereby represents and warrants to and agrees with the Company as follows:
3.1 Accredited Investor. Subscriber is an accredited investor, as defined
in Rule 501 of Regulation D, and has checked the applicable box set forth in
Section 12 of this Agreement.
3.2 Investment Experience; Access to Information; Independent
Investigation.
3.2.1 Access to Information. Subscriber or Subscriber's professional
advisor has been granted the opportunity to ask questions of and receive answers
from representatives of the Company, its officers, directors, employees and
agents concerning the terms and conditions of this Offering, the Company and its
business and prospects, and to obtain any additional information which
Subscriber or Subscriber's professional advisor deems necessary to verify the
accuracy and completeness of the information received.
3.2.2 Reliance on Own Advisors. Subscriber has relied completely on the
advice of, or has consulted with, Subscriber's own personal tax, investment,
legal or other advisors and has not relied on the Company or any of its
affiliates, officers, directors, attorneys, accountants or any affiliates of any
thereof and each other person, if any, who controls any of the foregoing, within
the meaning of Section 15 of the Act for any tax or legal advice (other than
reliance on information in the Disclosure Documents as defined in Section 3.2.4
below and on the Opinion of Counsel). The foregoing, however, does not limit or
modify Subscriber's right to rely upon covenants, representations and warranties
of the Company in this Agreement.
3.2.3 Capability to Evaluate. Subscriber has such knowledge and experience
in financial and business matters so as to enable such Subscriber to utilize the
information made available to it in connection with the Offering in order to
evaluate the merits and risks of the prospective investment, which are
substantial, including without limitation those set forth in the Disclosure
Documents (as defined in Section 3.2.4 below).
3.2.4 Disclosure Documents. Subscriber, in making Subscriber's investment
decision to subscribe for the Private Equity Line hereunder, represents that (a)
Subscriber has received and had an opportunity to review (i) the Company's
Annual Report on Form 10-K for the year ended April 30, 1997 (ii) the Company's
quarterly report on Form 10-Q for the quarter ended January 31, 1998, (iii) the
Risk Factors, attached as Exhibit J, (the "Risk
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Factors") (iv) the Capitalization Schedule, attached as Exhibit K, (the
"Capitalization Schedule") and (v) the Use of Proceeds Schedule, attached as
Exhibit L, (the "Use of Proceeds Schedule"); (b) Subscriber has read, reviewed,
and relied solely on the documents described in (a) above, the Company's
representations and warranties and other information in this Agreement,
including the exhibits, documents prepared by the Company regarding the Business
Product Overview which has been specifically provided to Subscriber in
connection with this Offering (the documents described in this Section 3.2.4 (a)
and (b) are collectively referred to as the "Disclosure Documents"), and an
independent investigation made by Subscriber and Subscriber's representatives,
if any; (c) Subscriber has, prior to the date of this Agreement, been given an
opportunity to review material contracts and documents of the Company which have
been filed as exhibits to the Company's filings under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and has had an opportunity
to ask questions of and receive answers from the Company's officers and
directors; and (d) is not relying on any oral representation of the Company or
any other person, nor any written representation or assurance from the Company
other than those contained in the Disclosure Documents or incorporated herein or
therein. The foregoing, however, does not limit or modify Subscriber's right to
rely upon covenants, representations and warranties of the Company in Sections 5
and 6 of this Agreement. Subscriber acknowledges and agrees that the Company has
no responsibility for, does not ratify, and is under no responsibility
whatsoever to comment upon or correct any reports, analyses or other comments
made about the Company by any third parties, including, but not limited to,
analysts' research reports or comments (collectively, "Third Party Reports"),
and Subscriber has not relied upon any Third Party Reports, including any
provided by the Placement Agent, in making the decision to invest.
3.2.5 Investment Experience; Fend for Self. Subscriber has substantial
experience in investing in securities and he, she or it has made investments in
securities other than those of the Company. Subscriber acknowledges that
Subscriber is able to fend for Subscriber's self in the transaction contemplated
by this Agreement, that Subscriber has the ability to bear the economic risk of
Subscriber's investment pursuant to this Agreement and that Subscriber is an
"Accredited Investor" by virtue of the fact that Subscriber meets the investor
qualification standards set forth in Section 3.1 above. Subscriber has not been
organized for the purpose of investing in securities of the Company, although
such investment is consistent with Subscriber's purposes.
3.3 Exempt Offering Under Regulation D.
3.3.1 [Intentionally Left Blank].
3.3.2 No General Solicitation. The Private Equity Line was not offered to
Subscriber through, and Subscriber is not aware of, any form of general
solicitation or general advertising, including, without limitation, (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
3.3.3 Restricted Securities. Subscriber understands that the Private Equity
Line is, the Common Stock issued at each Put Closing will be, and the Warrant
Shares will be, characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction exempt from the registration requirements of the federal securities
laws and that under such laws and applicable regulations such securities may not
be transferred or resold without registration under the Act or pursuant to an
exemption therefrom. In this connection, Subscriber represents that Subscriber
is familiar with Rule 144 under the Act, as presently in effect, and understands
the resale limitations imposed thereby and by the Act.
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3.3.4 Disposition. Without in any way limiting the representations set
forth above, Subscriber further agrees not to sell, transfer, assign, or pledge
the Securities (except for any bona fide pledge arrangement to the extent that
such pledge does not require registration under the Act or unless an exemption
from such registration is available) and provided further that if such pledge is
realized upon, any transfer to the pledgee shall comply with the requirements
set forth herein), or to otherwise dispose of all or any portion of the
Securities unless and until:
(a) There is then in effect a registration statement under the Act and any
applicable state securities laws covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(b) (i) Subscriber shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition to the extent relevant for
determination of the availability of an exemption from registration, and (ii) if
reasonably requested by the Company, Subscriber shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of the Securities under the Act or
state securities laws. It is agreed that the Company will not require the
Subscriber to provide opinions of counsel for transactions made pursuant to Rule
144 provided that Subscriber and Subscriber's broker, if necessary, provide the
Company with the necessary representations for counsel to the Company to issue
an opinion with respect to such transaction.
3.4 Due Authorization.
3.4.1 Authority. The person executing this Subscription Agreement, if
executing this Agreement in a representative or fiduciary capacity, has full
power and authority to execute and deliver this Agreement and each other
document included herein for which a signature is required in such capacity and
on behalf of the subscribing individual, partnership, trust, estate, corporation
or other entity for whom or which Subscriber is executing this Agreement.
Subscriber has reached the age of majority (if an individual) according to the
laws of the state in which he or she resides.
3.4.2 Due Authorization. If Subscriber is a corporation, Subscriber is duly
and validly organized, validly existing and in good tax and corporate standing
as a corporation under the laws of the jurisdiction of its incorporation with
full power and authority to purchase the Securities to be purchased by
Subscriber and to execute and deliver this Agreement.
3.4.3 Partnerships. If Subscriber is a partnership, the representations,
warranties, agreements and understandings set forth above are true with respect
to all partners of Subscriber (and if any such partner is itself a partnership,
all persons holding an interest in such partnership, directly or indirectly,
including through one or more partnerships), and the person executing this
Agreement has made due inquiry to determine the truthfulness of the
representations and warranties made hereby.
3.4.4 Representatives. If Subscriber is purchasing in a representative or
fiduciary capacity, the representations and warranties shall be deemed to have
been made on behalf of the person or persons for whom Subscriber is so
purchasing.
4. Acknowledgments Subscriber is aware that:
4.1 Risks of Investment. Subscriber recognizes that an investment in the
Company involves substantial risks, including the potential loss of Subscriber's
entire investment herein. Subscriber recognizes that the Disclosure Documents,
this Agreement and the exhibits
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hereto do not purport to contain all the information, which would be contained
in a registration statement under the Act;
4.2 No Government Approval. No federal or state agency has passed upon the
Securities, recommended or endorsed the Offering, or made any finding or
determination as to the fairness of this transaction;
4.3 No Registration, Restrictions on Transfer. As of the date of this
Agreement, the Securities and any component thereof have not been registered
under the Act or any applicable state securities laws by reason of exemptions
from the registration requirements of the Act and such laws, and may not be
sold, pledged (except for any limited pledge in connection with a margin account
of Subscriber to the extent that such pledge does not require registration under
the Act or unless an exemption from such registration is available and provided
further that if such pledge is realized upon, any transfer to the pledgee shall
comply with the requirements set forth herein), assigned or otherwise disposed
of in the absence of an effective registration of the Securities and any
component thereof under the Act or unless an exemption from such registration is
available;
4.4 Restrictions on Transfer. Subscriber may not attempt to sell, transfer,
assign, pledge or otherwise dispose of all or any portion of the Securities or
any component thereof in the absence of either an effective registration
statement or an exemption from the registration requirements of the Act and
applicable state securities laws;
4.5 No Assurances of Registration. There can be no assurance that any
registration statement will become effective at the scheduled time, or ever,
Subscriber acknowledges that it may be required to bear the economic risk of
Subscriber's investment for an indefinite period of time;
4.6 Exempt Transaction. Subscriber understands that the Securities are
being offered and sold in reliance on specific exemptions from the registration
requirements of federal and state law and that the representations, warranties,
agreements, acknowledgments and understandings set forth herein are being relied
upon by the Company in determining the applicability of such exemptions and the
suitability of Subscriber to acquire such Securities.
4.7 Legends. The certificates representing the Put Shares shall not bear a
Restrictive Legend. The certificates representing the Warrant Shares shall not
bear a Restrictive Legend unless they are issued at a time when the Registration
Statement is not effective for resale. It is understood that the certificates
evidencing any Warrant Shares issued at a time when the Registration Statement
is not effective for resale, subject to legend removal under the terms of
Section 6.9 below, shall bear the following legend (the "Legend"):
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or applicable state securities
laws, nor the securities laws of any other jurisdiction. They may not
be sold or transferred in the absence of an effective registration
statement under those securities laws or pursuant to an exemption
therefrom."
5. Representations and Warranties of the Company . The Company hereby makes
the following representations and warranties to Subscriber (which shall be true
at the signing of this Agreement, and as of any such later date as contemplated
hereunder) and agrees with Subscriber that:
5.1 Organization, Good Standing, and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of
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Delaware USA and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on the
business or properties of the Company and its subsidiaries taken as a whole. The
Company is not the subject of any pending, threatened or, to its knowledge,
contemplated investigation or administrative or legal proceeding (a
"Proceeding") by the Internal Revenue Service, the taxing authorities of any
state or local jurisdiction, or the Securities and Exchange Commission ("SEC"),
The National Association of Securities Dealer, Inc., The Nasdaq Stock Market,
Inc. or any state securities commission, or any other governmental entity, which
have not been disclosed in the Disclosure Documents. None of the disclosed
Proceedings, if any, will have a material adverse effect upon the Company or the
market for the Common Stock. The Company has the following subsidiaries:
Vira-Tech, Inc.; Viragen Technology, Inc.; Viragen Reagents, Inc.; Viragen
U.S.A., Inc.; Viragen (Europe) Ltd.; Viragen (Scotland) Ltd.; and Viragen
(Germany) GmbH.
5.2 Corporate Condition. The Company's condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the Company. Except for continuing losses,
there have been no material adverse changes to the Company's business, financial
condition, or prospects since the date of such Disclosure Documents. The
financial statements as contained in the 10-K and 10-Q have been prepared in
accordance with generally accepted accounting principles, consistently applied
(except as otherwise permitted by Regulation S-X of the Exchange Act), and
fairly present the financial condition of the Company as of the dates of the
balance sheets included therein and the consolidated results of its operations
and cash flows for the periods then ended. Without limiting the foregoing, there
are no material liabilities, contingent or actual, that are not disclosed in the
Disclosure Documents (other than liabilities incurred by the Company in the
ordinary course of its business, consistent with its past practice, after the
period covered by the Disclosure Documents). The Company has paid all material
taxes, which are due, except for taxes, which it reasonably disputes. There is
no material claim, litigation, or administrative proceeding pending, or, to the
best of the Company's knowledge, threatened against the Company, except as
disclosed in the Disclosure Documents. This Agreement and the Disclosure
Documents do not contain any untrue statement of a material fact and do not omit
to state any material fact required to be stated therein or herein necessary to
make the statements contained therein or herein not misleading in the light of
the circumstances under which they were made. No event or circumstance exists
relating to the Company which under applicable law, requires public disclosure
but which has not been so publicly announced or disclosed.
5.3 Authorization. All corporate action on the part of the Company by its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of the
Company hereunder and the authorization, issuance and delivery of the Common
Stock being sold hereunder and the issuance (and/or the reservation for
issuance) of the Warrants and the Warrant Shares have been taken, and this
Agreement, and the Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their terms,
except insofar as the enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws affecting creditors' rights
generally or by principles governing the availability of equitable remedies. The
Company has obtained all consents and approvals required for it to execute,
deliver and perform each agreement referenced in the previous sentence.
5.4 Valid Issuance of Common Stock. The Common Stock and the Warrants, when
issued, sold and delivered in accordance with the terms hereof, for the
consideration expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the representations of Subscriber in this
Agreement, will be issued in compliance with all applicable
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U.S. federal and state securities laws. The Warrant Shares, when issued in
accordance with the terms of the Warrants, shall be duly and validly issued and
outstanding, fully paid and nonassessable, and based in part on the
representations and warranties of Subscriber, will be issued in compliance with
all applicable U.S. federal and state securities laws. The Put Shares, the
Warrants and the Warrant Shares will be issued free of any preemptive rights.
5.5 Compliance with Other Instruments. The Company is not in violation or
default of any provisions of its Certificate of Incorporation or Bylaws each as
amended, and in effect on and as of the date of the Agreement or of any material
provision of any material instrument or material contract to which it is a party
or by which it is bound or of any provision of any federal or state judgment,
writ, decree, order, statute, rule or governmental regulation applicable to the
Company, which would have a material adverse effect on the Company's business or
prospects, or on the performance of its obligations under this Agreement or the
Registration Rights Agreement. The execution, delivery and performance of this
Agreement and the other agreements entered into in conjunction with the Offering
and the consummation of the transactions contemplated hereby and thereby will
not (a) result in any such violation or be in conflict with or constitute, with
or without the passage of time and giving of notice, either a default under any
such provision, instrument or contract or an event which results in the creation
of any lien, charge or encumbrance upon any assets of the Company, which would
have a material adverse effect on the Company's business or prospects, or on the
performance of its obligations under this Agreement, the Registration Rights
Agreement, (b) violate the Company's Certificate of Incorporation or By-Laws or
(c) violate any statute, rule or governmental regulation applicable to the
Company which violation would have a material adverse effect on the Company's
business or prospects.
5.6 Reporting Company. The Company is subject to the reporting requirements
of the Exchange Act, has a class of securities registered under Section 12 of
the Exchange Act, and has filed all reports required by the Exchange Act since
the date the Company first became subject to such reporting obligations. The
Company undertakes to furnish Subscriber with copies of such reports as may be
reasonably requested by Subscriber prior to consummation of this Offering and
thereafter, to make such reports available, for the full term of this Agreement,
including any extensions thereof, and for as long as Subscriber holds the
Securities. The Common Stock is duly listed on the Nasdaq National Market. The
Company is not in violation of the listing requirements of the Nasdaq National
Market and does not reasonably anticipate that the Common Stock will be delisted
by the Nasdaq National Market for the foreseeable future. The Company has filed
all reports required under the Exchange Act. The Company has not furnished to
the Subscriber any material nonpublic information concerning the Company.
5.7 Capitalization. The capitalization of the Company as of June 30, 1998,
is, and the capitalization as of the Closing, subject to conversion of any
outstanding Series I Preferred Stock, exercise of any outstanding warrants
and/or exercise of any outstanding stock options, after taking into account the
offering of the Securities contemplated by this Agreement and all other share
issuances occurring prior to this Offering, will be, as set forth in the
Capitalization Schedule as set forth in Exhibit K. There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities. Except as disclosed in the
Capitalization Schedule, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the Act
(except the Registration Rights
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Agreement, and registration rights relating to the Series H Preferred Stock, the
Series I Preferred Stock and the warrants issued in conjunction with each.
5.8 Intellectual Property. The Company has valid, unrestricted and
exclusive ownership of or rights to use the patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business. Exhibit M lists
all patents, trademarks, trademark registrations, trade names and copyrights of
the Company. The Company has granted such licenses or has assigned or otherwise
transferred a portion of (or all of) such valid, unrestricted and exclusive
patents, trademarks, trademark registrations, trade names, copyrights, know-how,
technology and other intellectual property necessary to the conduct of its
business as set forth in Exhibit M. The Company has been granted licenses,
know-how, technology and/or other intellectual property necessary to the conduct
of its business as set forth in Exhibit M. To the best of the Company's
knowledge after due inquiry, the Company is not infringing on the intellectual
property rights of any third party, nor is any third party infringing on the
Company's intellectual property rights. There are no restrictions in any
agreements, licenses, franchises, or other instruments that preclude the Company
from engaging in its business as presently conducted.
5.9 Use of Proceeds. As of the date hereof, the Company expects to use the
proceeds from this Offering (less fees and expenses) for the purposes and in the
approximate amounts set forth on the Use of Proceeds Schedule set forth as
Exhibit L hereto. These purposes and amounts are estimates and are subject to
change without notice to any Subscriber.
5.10 No Rights of Participation. Other than ▇▇▇▇▇▇ Investments, LLC and the
Holders of Series H and Series I Preferred Stock, no person or entity,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers, agents or other third parties, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the financing contemplated by this Agreement which has not been
waived.
5.11 Company Acknowledgment. The Company hereby acknowledges that
Subscriber may elect to hold the Securities for various periods of time, as
permitted by the terms of this Agreement, the Warrants, and other agreements
contemplated hereby, and the Company further acknowledges that Subscriber and
the Placement Agent have made no representations or warranties, either written
or oral, as to how long the Securities will be held by Subscriber or regarding
Subscriber's trading history or investment strategies.
5.12 [Intentionally Left Blank].
5.13 Underwriter's Fees and Rights of First Refusal. The Company is not
obligated to pay any compensation or other fees, costs or related expenditures
in cash or securities to any underwriter, broker, agent or other representative
other than the Placement Agent in connection with this Offering.
5.14 Availability of Suitable Form for Registration. The Company is
currently eligible and agrees to maintain its eligibility to register the resale
of its Common Stock on a registration statement on a suitable form under the
Act.
5.15 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any of the Company's securities or
solicited any offers to buy any security under circumstances that would prevent
the parties hereto from consummating the transactions contemplated hereby
pursuant to an exemption from registration under Regulation D of the Act or
would require the issuance of any other securities to be integrated with this
Offering under the Rules of Nasdaq.
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The Company has not engaged in any form of general solicitation or advertising
in connection with the offering of the Common Stock or the Warrants.
5.16 [Intentionally Left Blank].
5.17 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of its actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
5.18 Key Employees. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in Exhibit N. No Key Employee, to
the best knowledge of the Company and its subsidiaries, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of the Company and
its subsidiaries, any intention to terminate his employment with, or services
to, the Company or any of its subsidiaries. "Key Employee" means each of the
following: ▇▇▇▇▇▇ ▇▇▇▇▇, Chairman and President; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice
Chairman; ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Operating Officer; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive
Vice President and CFO; and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D., Vice President, Research
and Development.
5.19 Representations Correct. The foregoing representations, warranties and
agreements are true, correct and complete in all material respects, and shall
survive any Put Closing and the issuance of the shares of Common Stock thereby.
5.20 Tax Status. The Company has made or filed all federal and state income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject (unless and only to the extent that the Company has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and as set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
5.21 Transactions With Affiliates. Except as set forth in the Disclosure
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
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5.22 Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under Delaware law which is or could become
applicable to the Subscriber as a result of the transactions contemplated by
this Agreement, including, without limitation, the issuance of the Common Stock,
any exercise of the Warrants and ownership of the Common Shares and Warrant
Shares. The Company has not adopted and will not adopt any "poison pill"
provision that will be applicable to Subscriber as a result of transactions
contemplated by this Agreement.
5.23 Other Agreements. The Company has not, directly or indirectly, made
any agreements with the Subscriber under a subscription in the form of this
Agreement for the purchase of Common Stock, relating to the terms or conditions
of the transactions contemplated hereby or thereby except as expressly set forth
herein, respectively, or in exhibits hereto or thereto.
5.24 Major Transactions. There are no other Major Transactions currently
pending or contemplated by the Company, except the transaction with
Inflammatics, Inc.
5.25 Financings. There are no other financings currently pending or
contemplated by the Company, except the VUSA Transaction.
5.26 Shareholder Authorization. The Company shall, at its next annual
shareholder meeting, or at a special meeting to be held as soon as practicable
thereafter, use its best efforts to obtain approval of its shareholders to (i)
authorize the issuance of the full number of shares of Common Stock which would
be issuable under this Agreement and eliminate any prohibitions under applicable
law or the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the Company
or any of its securities with respect to the Company's ability to issue shares
of Common Stock in excess of the Cap Amount (such approvals being the "20%
Approval") and (ii) the increase in the number of authorized shares of Common
Stock of the Company (the "Share Authorization Increase Approval") such that at
least 20,000,000 shares can be reserved for this Offering. In connection with
such shareholder vote, the Company shall use its best efforts to cause all
officers and directors of the Company to promptly enter into irrevocable
agreements to vote all of their shares in favor of eliminating such
prohibitions. As soon as practicable after the 20% Approval and the Share
Authorization Increase Approval, the Company agrees to use its best efforts to
reserve 20,000,000 shares of Common Stock for issuance under this Agreement.
6. Covenants of the Company
6.1 Independent Auditors. The Company shall, until at least the Termination
Date, maintain as its independent auditors an accounting firm authorized to
practice before the SEC.
6.2 Corporate Existence and Taxes. The Company shall, until at least the
Termination Date, maintain its corporate existence in good standing and remain a
"Reporting Issuer" (defined as a Company which files periodic reports under the
Exchange Act) (provided, however, that the foregoing covenant shall not prevent
the Company from entering into any merger or corporate reorganization as long as
the surviving entity in such transaction, if not the Company, assumes the
Company's obligations with respect to the Common Stock and has Common Stock
listed for trading on a stock exchange or on Nasdaq and is a Reporting Issuer)
and shall pay all its taxes when due except for taxes which the Company
disputes.
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6.3 Registration Rights. The Company will enter into a registration rights
agreement covering the resale of the Common Shares and the Warrant Shares
substantially in the form of the Registration Rights Agreement attached as
Exhibit A.
6.4 [Intentionally Omitted].
6.5 Asset Transfers. The Company shall not (i) transfer, sell, convey or
otherwise dispose of any of its material assets to any Subsidiary except for a
cash or cash equivalent consideration and for a proper business purpose or (ii)
transfer, sell, convey or otherwise dispose of any of its material assets to any
Affiliate, as defined below, during the Term of this Agreement. For purposes
hereof, "Affiliate" shall mean any officer of the Company, director of the
Company or owner of twenty percent (20%) or more of the Common Stock or other
securities of the Company.
6.6 Capital Raising Limitations; Rights of First Refusal.
6.6.1 Capital Raising Limitations. During the period from the date of this
Agreement until the earlier of (i) the date that is one year after the
Termination Date, or (ii) (a) in the case of a Company Equity Line Termination,
the date that is one (1) year after the date of such Company Equity Line
Termination, or (b) in the case of an Automatic Equity Line Termination that is
not waived by the Subscriber, the date that is six (6) months after the date of
such Automatic Equity Line Termination, the Company shall not issue or sell, or
agree to issue or sell, for cash in private capital raising transactions (the
following to be collectively referred to herein as, the "Variable Priced
Securities"), (a) any debt or equity securities which are convertible into,
exercisable or exchangeable for, or carry the right to receive additional shares
of Common Stock either (i) at any conversion, exercise or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for Common Stock at any time after the initial issuance of such debt or equity
security, or (ii) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date at any time after the initial
issuance of such debt or equity security or upon the occurrence of specified
contingent events directly or indirectly related to the business of the Company
of the market for the Common Stock, or (b) any securities of the Company
pursuant to an equity line structure or format similar in nature to this
Offering without obtaining the prior written approval of the Subscriber of the
Offering (the limitations referred to in this sentence are collectively referred
to as the "Capital Raising Limitations").
6.6.2 Subscriber's Right of First Refusal. For any private capital raising
transactions of Variable Priced Securities which close on or prior to the date
that is six (6) months after the Termination Date of this Agreement, not
including any warrants issued in conjunction with this Private Equity Line, the
Company agrees to deliver to Subscriber, at least ten (10) days prior to the
closing of such transaction, written notice describing the proposed transaction,
including the terms and conditions thereof, and providing the Subscriber and its
affiliates an option during the ten (10) day period following delivery of such
notice to purchase the securities being offered in such transaction on the same
terms as contemplated by such transaction.
6.6.3 Exceptions to the Capital Raising Limitation and Rights of First
Refusal. Notwithstanding the above, the Capital Raising Limitations and the
Rights of First Refusal shall not apply to the VUSA Transaction or any
transaction involving issuances of securities in connection with a merger,
consolidation, acquisition or sale of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company or exercise of options by employees,
consultants or directors. The Capital Raising Limitations also shall not apply
to (a) the issuance of securities upon exercise or
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conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, (b) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan for the benefit of the Company's employees,
directors or consultants, or (c) the issuance of debt securities, with no equity
feature, incurred solely for working capital purposes.
6.7 Financial 10-K Statements, Etc. and Current Reports on Form 8-K. The
Company shall deliver to the Subscriber copies of its annual reports on Form
10-K, and quarterly reports on Form 10-Q and shall deliver to the Subscriber
current reports on form 8-K within two (2) days of filing for the Term of this
Agreement.
6.8 Opinion of Counsel. Subscriber shall, concurrent with the purchase of
the Common Stock and accompanying Warrants pursuant to this Agreement, receive
an opinion letter from Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson, PA; New River Center,
Suite 1900, ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Telephone: (954)
▇▇▇-▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, ("Counsel"), counsel to the Company, in the
form attached as Exhibit B or in such form as agreed upon by the parties, as to
the Private Equity Line Commitment Closing and in the form attached as Exhibit I
or in such form as agreed upon by the parties, as to any Put Closing.
6.9 Removal of Legend. If the certificates representing any Securities are
issued with a restrictive Legend in accordance with the terms of this Agreement,
the Legend shall be removed and the Company shall issue a certificate without
such Legend to the holder of any Security upon which it is stamped, and a
certificate for a security shall be originally issued without the Legend, if (a)
the sale of such Security is registered under the Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions (the reasonable
cost of which shall be borne by the Company), to the effect that a public sale
or transfer of such Security may be made without registration under the Act, or
(c) such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144. Each Subscriber agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Act.
6.10 Listing. Subject to the remainder of this Section 6.10, the Company
shall ensure that its shares of Common Stock (including all Warrant Shares) are
listed and available for trading on the Nasdaq National Market ("NMS").
Thereafter, the Company shall (i) use its best efforts to continue the listing
and trading of its Common Stock on the NMS, or on the New York Stock Exchange
("NYSE") or any other national exchange or over-the-counter market system; and
(ii) comply in all material respects with the Company's reporting, filing and
other obligations under the By-Laws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable.
6.11 The Company's Instructions to Transfer Agent. The Company will
instruct the Transfer Agent of the Common Stock to issue certificates,
registered in the name of each Subscriber or its nominee, for the Put Shares,
Additional Shares and Warrant Shares in such amounts as specified from time to
time by the Company upon any exercise by the Company of a Put and/or exercise of
the Warrants by the holder thereof. Such certificates shall not bear a Legend
unless issuance with a Legend is permitted by the terms of this Agreement and
Legend removal is not permitted by Section 6.9 hereof and the Company shall
cause the Transfer Agent to issue such certificates without a Legend. Nothing in
this Section shall affect in any way each Subscriber's obligations and agreement
set forth in Sections 3.3.3 or 3.3.4 hereof to resell the Securities pursuant to
an effective registration statement and to deliver a prospectus in connection
with such sale or in compliance with an exemption from the registration
requirements
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of applicable securities laws. If (a) a Subscriber provides the Company with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration or (b) a Subscriber transfers
Securities to an affiliate which is an accredited investor pursuant to Rule 144,
the Company shall permit the transfer, and, in the case of Put Shares and
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denomination as specified by such
Subscriber. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Subscriber by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 6.11 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 6.11, that a
Subscriber shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6.12 Stockholder 20% Approval. Prior to the closing of any Put that would
cause the Aggregate Issued Shares to exceed the Cap amount, the Company shall
obtain approval of its stockholders to authorize (i) the issuance of the full
number of shares of Common Stock which would be issuable pursuant to this
Agreement but for the Cap Amount and eliminate any prohibitions under applicable
law or the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the Company
or any of its securities with respect to the Company's ability to issue shares
of Common Stock in excess of the Cap Amount (such approvals being the
"Stockholder 20% Approval").
6.13 Press Release. The Company agrees that the Subscriber shall have the
right to review and comment upon any press release issued by the Company in
connection with the Offering which approval shall not be unreasonably withheld
by Subscriber.
7. Subscriber Covenant/Miscellaneous
7.1 Representations and Warranties Survive the Closing; Severability.
Subscriber's and the Company's representations and warranties shall survive the
Subscription Date and any Put Closing contemplated by this Agreement
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, or is altered by a term required by the Securities
Exchange Commission to be included in the Registration Statement, this Agreement
shall continue in full force and effect without said provision; provided that if
the removal of such provision materially changes the economic benefit of this
Agreement to the Subscriber, the Subscriber, at its option, may terminate this
Agreement or require that other terms of the Agreement be amended to compensate
for such material economic changes.
7.2 Successors and Assigns. This Agreement shall not be assignable without
the Company's written consent, If assigned, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Subscriber may assign Subscriber's rights hereunder, in
connection with any private sale of the Common Stock of such Subscriber, so long
as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
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Agreement in a form acceptable to the Company and provides an original copy of
such acknowledgment to the Company.
7.3 Execution in Counterparts Permitted. This Agreement may be executed in
any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one (1) instrument.
7.4 Titles and Subtitles; Gender. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The use in this Agreement of a
masculine, feminine or neither pronoun shall be deemed to include a reference to
the others.
7.5 Written Notices, Etc. Any notice, demand or request required or
permitted to be given by the Company or Subscriber pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally, or by facsimile or upon receipt if by overnight or two (2) day
courier, addressed to the parties at the addresses and/or facsimile telephone
number of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing; provided,
however, that in order for any notice to be effective as to the Subscriber such
notice shall be delivered and sent, as specified herein, to all the addresses
and facsimile telephone numbers of the Subscriber set forth at the end of this
Agreement or such other address and/or facsimile telephone number as Subscriber
may request in writing.
7.6 Expenses. Except as set forth in the Registration Rights Agreement,
each of the Company and Subscriber shall pay all costs and expenses that it
respectively incurs, with respect to the negotiation, execution, delivery and
performance of this Agreement.
7.7 Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Common Stock certificates, the
Warrants, the Registration Rights Agreement, and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
Except as expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
7.8 Arbitration. Except as otherwise provided in Section 6.11 of this
Agreement, any controversy or claim arising out of or related to the Transaction
Documents or the breach thereof, shall be settled by binding arbitration in
Wilmington, Delaware in accordance with the Expedited Procedures (Rules 53-57)
of the Commercial Arbitration Rules of the American Arbitration Association
("AAA"). A proceeding shall be commenced upon written demand by Company or any
Subscriber to the other. The arbitrator(s) shall enter a judgment by default
against any party, which fails or refuses to appear in any properly noticed
arbitration proceeding. The proceeding shall be conducted by one (1) arbitrator,
unless the amount alleged to be in dispute exceeds two hundred fifty thousand
dollars ($250,000), in which case three (3) arbitrators shall preside. The
arbitrator(s) will be chosen by the parties from a list provided by the AAA, and
if they are unable to agree within ten (10) days, the AAA shall select the
arbitrator(s). The arbitrators must be experts in securities law and financial
transactions. The arbitrators shall assess costs and expenses of the
arbitration, including all attorneys' and experts' fees, as the arbitrators
believe is appropriate in light of the merits of the parties' respective
positions in the issues in dispute. Each party submits irrevocably to the
jurisdiction of any state court sitting in Wilmington, Delaware or to the United
States District Court sitting in Delaware for purposes of enforcement of any
discovery order, judgment or award in connection with such arbitration. The
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award of the arbitrator(s) shall be final and binding upon the parties and may
be enforced in any court having jurisdiction. The arbitration shall be held in
such place as set by the arbitrator(s) in accordance with Rule 55.
Although the parties, as expressed above, agree that all claims, including
claims that are equitable in nature, for example specific performance, shall
initially be prosecuted in the binding arbitration procedure outlined above, if
the arbitration panel dismisses or otherwise fails to entertain any or all of
the equitable claims asserted by reason of the fact that it lacks jurisdiction,
power and/or authority to consider such claims and/or direct the remedy
requested, then, in only that event, will the parties have the right to initiate
litigation respecting such equitable claims or remedies. The forum for such
equitable relief shall be in either a state or federal court sitting in
Wilmington, Delaware. Each party waives any right to a trial by jury, assuming
such right exists in an equitable proceeding, and irrevocably submits to the
jurisdiction of said Delaware court. Delaware law shall govern both the
proceeding as well as the interpretation and construction of the Transaction
Documents and the transaction as a whole.
8. Subscription and Wiring Instructions; Irrevocability.
8.1 Subscription
(a) Wire transfer of Subscription Funds. Subscriber shall deliver
Put Dollar Amounts (as payment towards any Put Share Price) by
wire transfer, to the Company pursuant to a wire instruction
letter to be provided by the Company, and signed by the Company
and the Placement Agent.
(b) Irrevocable Subscription. Subscriber hereby acknowledges and
agrees, subject to the provisions of any applicable laws providing
for the refund of subscription amounts submitted by Subscriber,
that this Agreement is irrevocable and that Subscriber is not
entitled to cancel, terminate or revoke this Agreement or any
other agreements executed by such Subscriber and delivered
pursuant hereto, and that this Agreement and such other agreements
shall survive the death or disability of such Subscriber and shall
be binding upon and inure to the benefit of the parties and their
heirs, executors, administrators, successors, legal
representatives and assigns. If the Securities subscribed for are
to be owned by more than one person, the obligations of all such
owners under this Agreement shall be joint and several, and the
agreements, representations, warranties and acknowledgments
herein contained shall be deemed to be made by and be binding upon
each such person and his heirs, executors, administrators,
successors, legal representatives and assigns. Notwithstanding the
foregoing, (i) if the conditions to Closing are not satisfied or
(ii) if the Disclosure Documents are discovered prior to Closing
to contain statements which are materially inaccurate, or omit
statements of material fact, Subscriber may revoke or cancel this
Agreement.
8.2 Acceptance of Subscription. Ownership of the number of securities
purchased hereby will pass to Subscriber upon the Warrant Closing or any Put
Closing.
8.3 [Intentionally Omitted]
9. Indemnification.
In consideration of the Subscriber's execution and delivery of the
Subscription Agreement, the Registration Rights Agreement and the Warrants (the
"Transaction Documents")
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and acquiring the Securities thereunder and in addition to all of the Company's
other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless Subscriber and the Placement Agent and all
of their stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents, members, partners or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorney's fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
documents contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim, derivative or otherwise, by any
stockholder of the Company based on a breach or alleged breach by the Company or
any of its officers or directors of their fiduciary or other obligations to the
stockholders of the Company.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which it
would be required to make if such foregoing undertaking was enforceable which is
permissible under applicable law.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified Party will, if a claim in respect thereof is to be made against the
other party (hereinafter "Indemnitor") under this Section 9, deliver to the
Indemnitor a written notice of the commencement thereof and the Indemnitor shall
have the right to participate in and to assume the defense thereof with counsel
reasonably selected by the Indemnitor, provided, however, that an Indemnified
Party shall have the right to retain its own counsel, with the reasonably
incurred fees and expenses of such counsel to be paid by the Indemnitor, if
representation of such Indemnified Party by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential conflicts of
interest between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
Indemnitor within a reasonable time of the commencement of any such action, if
prejudicial to the Indemnitor's ability to defend such action, shall relieve the
Indemnitor of any liability to the Indemnified Party under this Section 9, but
the omission to so deliver written notice to the Indemnitor will not relieve it
of any liability that it may have to any Indemnified Party other than under this
Section 9 to the extent it is prejudicial.
10. Certain Additional Legends and Information.
FOR FLORIDA RESIDENTS:
THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE
HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA SECURITIES
ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF
FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING
THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS
MADE BY SUCH SUBSCRIBER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW
AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT
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PRIVILEGE IS COMMUNICATED TO SUCH SUBSCRIBER, WHICHEVER OCCURS LATER.
FOR MAINE RESIDENTS:
THESE SECURITIES ARE BEING SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION
WITH THE BANK SUPERINTENDENT OF THE STATE OF MAINE UNDER SECTION 10502(2)(R) OF
TITLE 32 OF THE MAINE REVISED STATUTES. THESE SECURITIES MAY BE DEEMED
RESTRICTED SECURITIES AND AS SUCH THE HOLDER MAY NOT BE ABLE TO RESELL THE
SECURITIES UNLESS PURSUANT TO REGISTRATION UNDER STATE OR FEDERAL SECURITIES
LAWS OR UNLESS AN EXEMPTION UNDER SUCH LAWS EXISTS.
FOR PENNSYLVANIA RESIDENTS:
EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR THE SECURITIES BEING OFFERED
HEREBY AGREES NOT TO SELL THESE SECURITIES FOR A PERIOD OF TWELVE MONTHS AFTER
THE DATE OF PURCHASE UNLESS SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE. UNDER
PROVISION OF THE PENNSYLVANIA SECURITIES ACT OF 1972 (THE "1972 ACT"), EACH
PENNSYLVANIA RESIDENT SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT
INCURRING ANY LIABILITY, TO THE SELLER, UNDERWRITER (IF ANY) OR ANY PERSON,
WITHIN TWO (2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF HIS
WRITTEN BINDING CONTRACT OF PURCHASE OR IN THE CASE OF A TRANSACTION IN WHICH
THERE IS NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS AFTER
HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED. TO ACCOMPLISH
THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE SELLING
AGENT AT THE ADDRESS SET FORTH IN THE TEXT OF THE MEMORANDUM, INDICATING HIS OR
HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED
PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY. IT IS PRUDENT TO
SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT
IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT WAS MAILED. IF THE REQUEST IS
MADE ORALLY (IN PERSON OR BY TELEPHONE, TO THE SELLING AGENT AT THE NUMBER
LISTED IN THE TEXT OF THE MEMORANDUM) A WRITTEN CONFIRMATION THAT THE REQUEST
HAS BEEN RECEIVED SHOULD BE REQUESTED.
FOR NEW HAMPSHIRE RESIDENTS:
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH
FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR
A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
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[INTENTIONALLY LEFT BLANK]
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11. [Intentionally Left Blank].
12. Accredited Investor. Subscriber is an "accredited investor" because
(check all applicable boxes):
(a) [ ] it is an organization described in Section 501(c)(3)
of the Internal Revenue Code, or a corporation, limited
duration company, limited liability company, business
trust, or partnership not formed for the specific
purpose of acquiring the securities offered, with total
assets in excess of $5,000,000.
(b) [ ] any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person who has such knowledge and
experience in financial and business matters that he is
capable of evaluating the merits and risks of the
prospective investment.
(c) [ ] a natural person, who
[ ] is a director, executive officer or general partner of
the issuer of the securities being offered or sold or a
director, executive officer or general partner of a
general partner of that issuer.
[ ] has an individual net worth, or joint net worth
with that person's spouse, at the time of his
purchase exceeding $1,000,000.
[ ] had an individual income in excess of $200,000 in
each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching
the same income level in the current year.
(d) [ ] an entity each equity owner of which is an entity
described in a - b above or is an individual who could
check one (1) of the last three (3) boxes under
subparagraph (c) above.
(e) [ ] other [specify] _______________________________________
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The undersigned hereby subscribes for ___________% of The Equity Line
Maximum Offering Amount and acknowledges that this Agreement and the
subscription represented hereby shall not be effective unless accepted by the
Company as indicated below.
IN WITNESS WHEREOF, the undersigned Subscriber does represent and certify
under penalty of perjury that the foregoing statements are true and correct and
that Subscriber by the following signature(s) executed this Agreement.
Dated this _____ day of September, 1998.
----------------------- -----------------------------------
Your Signature PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
____________________________________ SECURITY DELIVERY INSTRUCTIONS:
Name: Please Print Please type or print address where
your security is to be delivered
____________________________________ ATTN: ______________________________
Title/Representative Capacity
(if applicable)
_____________________________________ ____________________________________
Name of Company You Represent Street Address
(if applicable)
_____________________________________ ____________________________________
Place of Execution of this Agreement City, State or Province, Country,
Offshore Postal Code
NOTICE DELIVERY INSTRUCTIONS: WITH A COPY DELIVERED TO:
Please print address where any Notice Please print address where Copy is
is to be delivered to be delivered
ATTN: __________________________ ATTN: ______________________________
_____________________________________ ____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________ ____________________________________
City, State or Province, Country, City, State or Country,
Offshore Postal Code Offshore Postal Code
Telephone: __________________________ Telephone: _________________________
Facsimile: __________________________ Facsimile: _________________________
Facsimile: __________________________ Facsimile: _________________________
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF _____________% OF THE
EQUITY LINE MAXIMUM OFFERING AMOUNT ON THE ____ DAY OF SEPTEMBER, 1998.
VIRAGEN, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Exec. Vice President/CFO
Address: Viragen, Inc.
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
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ADVANCE PUT NOTICE
VIRAGEN, INC. (the "Company") hereby intends, subject to the Individual Put
Limit (as defined in the Subscription Agreement), to elect to exercise a Put to
sell the number of shares of Common Stock of the Company specified below, to
_____________________________, the Subscriber, as of the Intended Put Date
written below, all pursuant to that certain Regulation D Private Equity Line
Subscription Agreement (the "Subscription Agreement").
Date of Advance Put Notice: _______________
Intended Put Date :________________________
Intended Put Share Amount: ________________
VIRAGEN, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Exec. Vice President/CFO
Address:Viragen, Inc.
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT E
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CONFIRMATION OF ADVANCE PUT NOTICE
_________________________________, the Subscriber, hereby confirms receipt of
VIRAGEN, INC.'s (the "Company") Advance Put Notice on the Advance Put Date
written below, and its intention to elect to exercise a Put to sell shares of
common stock ("Intended Put Share Amount") of the Company to the Subscriber, as
of the intended Put Date written below, all pursuant to that certain Regulation
D Private Equity Line Subscription Agreement (the "Subscription Agreement").
Date of Confirmation: __________________
Date of Advance Put Notice: ____________
Intended Put Date: _____________________
Intended Put Share Amount: _____________
SUBSCRIBER(S)
________________________________________
Subscriber's Name
By: ___________________________________
(Signature)
Address: _________________________________________
_________________________________________
_________________________________________
Telephone No.: _________________________________________
Facsimile No.: _________________________________________
EXHIBIT F
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PUT NOTICE
VIRAGEN, INC. (the "Company") hereby elects to exercise a Put to sell shares of
common stock ("Common Stock") of the Company to _____________________________,
the Subscriber, as of the Put Date, at the Put Share Price and for the number of
Put Shares written below, all pursuant to that certain Regulation D Private
Equity Line Subscription Agreement (the "Subscription Agreement").
PUT DATE :_________________
INTENDED PUT SHARE AMOUNT (from Advance
Put Notice):______________ Common Shares
VOLUME EVALUATION PERIOD (calculated as
set forth below, but not to exceed 10
Trading Days):
______ Trading Days
PRICING PERIOD (calculated as set forth below):
______ Trading Days
PUT SHARE AMOUNT (i.e., the number of Put
Shares of Common Stock to be issued, which
shall equal the Intended Put Share Amount, but
shall not exceed the "Individual Put Limit"):
____________________ Common Shares
Note: For purposes hereof, the "Volume Evaluation Period" shall equal the
minimum period of consecutive Trading Days, ending on the Trading Day
immediately preceding the Put Date, for which the aggregate daily reported
trading volume in the outstanding Common Stock on the Company's Principal Market
equals or exceeds two (2) times the Put Share Amount.
The "Pricing Period," unless otherwise shortened or extended under the terms of
the Equity Line Agreement, shall equal a period of "X" Trading Days immediately
following the applicable Put Date, where "X" equals two (2) multiplied by the
number of Trading Days in the Volume Evaluation Period.
The "Individual Put Limit" shall equal one half of the aggregate daily reported
trading volume in the outstanding Common Stock reported on the Company's
Principal Market in a maximum Volume Evaluation Period of ten (10) Trading Days,
ending on the Trading Day immediately preceding the Put Date.
VIRAGEN, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Exec. Vice President/CFO
Address:Viragen, Inc.
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT G
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CONFIRMATION OF PUT NOTICE
_________________________________, the Subscriber, hereby confirms receipt of
Viragen Inc.'s (the "Company") Put Notice and election to exercise a Put to sell
___________________________ shares of common stock ("Common Stock") of the
Company to Subscriber, as of the Put Date, all pursuant to that certain
Regulation D Private Equity Line Subscription Agreement (the "Subscription
Agreement").
Date of Confirmation: __________________
Put Date :______________________________
Volume Evaluation Period: ______________ Trading Days
Number of Put Shares of
Common Stock to be Issued: _____________
Pricing Period: __________ Trading Days
SUBSCRIBER(S)
________________________________________
Subscriber's Name
By: ____________________________________
(Signature)
Address:________________________________________
________________________________________
________________________________________
Telephone No.: ________________________________________
Facsimile No.: ________________________________________
EXHIBIT H
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PRICING CONFIRMATION NOTICE
VIRAGEN, INC. (the "Company") hereby states that the Market Price, Put Share
Price and Put Dollar Amount for the Put Shares of Common Stock put to the
Subscriber in the Put Notice referred to below are as follows, pursuant to that
certain Regulation D Private Equity Line Subscription Agreement (the
"Subscription Agreement").
Put Date: _________________________________
Number of Shares Put on Put Date: _________
Pricing Period: ________ Trading Days
Market Price for Put: _____________________
Applicable Put Share Price: _______________
Put Dollar Amount: ________________________
VIRAGEN, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Exec. Vice President/CFO
Address:Viragen, Inc.
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT P
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PUT CANCELLATION NOTICE
VIRAGEN, INC. (the "Company") hereby cancels the Put specified below, pursuant
to that certain Regulation D Private Equity Line Subscription Agreement (the
"Subscription Agreement"), as of the close of trading on the date specified
below (the "Cancellation Date," which date must be on or after the date that
this notice is delivered to the Subscriber), provided that such cancellation
shall not apply to the number of shares of Common Stock that the Subscriber has
sold on or after the date of the applicable Advance Put Notice up through the
close of trading on the Cancellation Date:
Cancellation Date: ________________________
Put Date of Put Being Canceled: ___________
Number of Shares Put on Put Date: _________
The Company understands that, by canceling this Put, it must give twenty (20)
Business Days advance written notice to the Subscriber before effecting the next
Put.
VIRAGEN, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Exec. Vice President/CFO
Address:Viragen, Inc.
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT Q
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Exhibit (10)(LXII).02
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
September 22nd, 1998, by and among Viragen, Inc., a corporation duly
incorporated and existing under the laws of the State of Delaware (the
"Company"), ▇▇▇▇▇▇ Investments, LLC, a Georgia limited liability company, d/b/a
▇▇▇▇▇▇ Institutional Finance ("Placement Agent"), and the subscriber as named on
the signature page hereto (hereinafter referred to as "Subscriber").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Offering") of up to Twenty
Million Dollars ($20,000,000), excluding any funds paid upon exercise of the
Warrants, of Common Stock of the Company pursuant to that certain Regulation D
Common Stock Equity Line Subscription Agreement, of even date herewith (the
"Subscription Agreement") between the Company and the Subscriber, the Company
has agreed to sell and the Subscriber has agreed to purchase, from time to time
as provided in the Subscription Agreement, shares of the Company's Common Stock
for a maximum aggregate offering amount of Twenty Million Dollars ($20,000,000);
WHEREAS, pursuant to the terms of the Subscription Agreement, the Company
has agreed to issue to the Subscriber, from time to time, Purchase Warrants, as
defined in the Subscription Agreement, to purchase a number of shares of Common
Stock, exercisable for five years from the date of issuance (collectively, the
"Subscriber Warrants");
WHEREAS, pursuant to the terms of the Subscription Agreement, the Company
has agreed to provide the Subscriber with certain registration rights with
respect to the Common Stock to be issued in the Offering and the Common Stock
issuable upon exercise of the Subscriber Warrants as set forth in this
Registration Rights Agreement;
WHEREAS, pursuant to the terms of that certain placement agent agreement
(the "Placement Agent Agreement"), of even date herewith, by and between the
Company and Placement Agent, the Company has agreed to issue to Placement Agent,
from time to time, warrants to purchase a number of shares of Common Stock,
exercisable for five years from the date of issuance(the "Placement Agent
Warrants"); and
WHEREAS, pursuant to the terms of the Placement Agent Agreement, the
Company has agreed to provide Placement Agent with certain registration rights
with respect to the Common Stock and the Common Stock issuable upon exercise of
the Placement Agent Warrants as set forth in this Registration Rights Agreement.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in Agreement and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the Recitals
above), the following terms shall have the following meanings (such meanings to
be equally applicable to both singular and plural forms of the terms defined):
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"1934 Act" shall mean the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Accrual Rate" shall mean X% per month, accruing daily from the date that
the applicable payment, as specified herein, begins to accrue, multiplied by the
applicable principal amount, where "X" equals one percent (1%) for the first
month following the date in question, and increases by an additional one percent
(1%) for each month that passes after the date in question, up to a maximum of
five percent (5%) per month; provided, however, that if the payments resulting
from such accrual are not paid to the Holder within five (5) business days of
the date they are required to be paid, "X" shall be deemed to have equaled five
percent (5%) from the beginning of such unpaid accrual until such payments are
made.
"Additional Shares" shall mean Additional Ineffective Period Shares and
Additional Delisting Event Shares.
"Additional Delisting Event Shares" shall have the meaning set forth in
Section 2.12.
"Additional Ineffective Period Shares" shall have the meaning set forth in
Section 2.10(ii).
"Additional Registration Statement" shall have the meaning set forth in
Section 3(b).
"Amended Registration Statement" shall have the meaning set forth in
Section 3(b).
"Closing Bid Price" shall have the meaning set forth in the Subscription
Agreement.
"Common Stock" shall mean the common stock, par value $0.01, of the
Company.
"Delisting Event" shall have the meaning as set forth in Section 2.12.
"Due Date" shall mean the date that is ninety (90) days after the date of
this Agreement.
"Effective Date" shall have the meaning set forth in Section 2.4.
"Filing Date" shall mean the date that is forty five (45) days after the
date of this Agreement.
"Holder" shall mean Subscriber, Placement Agent, and any other person or
entity owning or having the right to acquire Registrable Securities or any
permitted assignee thereof;
"Ineffective Period" shall have the meaning set forth in Section 2.10(i).
"Ineffective Registration Payment" shall have the meaning set forth in
Section 2.10(i).
"Payment" shall have the meaning set forth in Section 2.11.
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"Placement Agent Agreement" shall have the meaning set forth in the
Recitals hereto.
"Placement Agent Warrants" shall have the meaning set forth in the Recitals
hereto.
"Post-Delisting Event Price" shall have the meaning as set forth in Section
2.12.
"Post-Ineffective Price" shall have the meaning set forth in Section
2.10(ii).
"Pre-Delisting Event Price" shall have the meaning as set forth in Section
2.12.
"Pre-Ineffective Price" shall have the meaning set forth in Section
2.10(ii).
"Put" shall have the meaning as set forth in the Subscription Agreement.
"Register," "Registered," and "Registration" shall mean and refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and pursuant to Rule 415 under the Act or any successor rule, and the
declaration or ordering of effectiveness of such registration statement or
document;
"Registrable Securities" shall have the meaning set forth in Section 2.1.
"Registration Statement" shall have the meaning set forth in Section 2.2.
"Rule 144" shall mean Rule 144, as amended, promulgated under the Act.
"Subscriber" shall have the meaning set forth in the preamble to this
Agreement.
"Subscriber Warrants" shall have the meaning set forth in the Recitals.
"Subscription Agreement" shall have the meaning set forth in the Recitals
hereto.
"Supplemental Registration Statement" shall have the meaning set forth in
Section 3(b).
"Trading Day" shall have the meaning set forth in the Subscription
Agreement.
"Warrants" shall mean the Subscriber Warrants and the Placement Agent
Warrants collectively.
"Warrant Shares" shall mean shares of Common Stock issuable upon exercise
of any Warrant.
2. Required Registration.
2.1 Registrable Securities. "Registrable Securities" shall mean those
shares of the Common Stock of the Company together with any capital stock issued
in replacement of, in exchange for or otherwise in respect of such Common Stock,
that are: (i) issuable or issued to the Subscriber pursuant to the Subscription
Agreement or in this Agreement, (ii) issuable or issued upon exercise of the
Subscriber Warrants, and (iii) issuable or issued upon exercise of the Placement
Agent Warrants; provided, however, that notwithstanding the above, the following
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shall not be considered Registrable Securities:
(a) any Common Stock which would otherwise be deemed to be Registrable
Securities, if and to the extent that those shares of Common Stock may be resold
in a public transaction without volume limitations or other material
restrictions without registration under the Act, including without limitation,
pursuant to Rule 144 under the Act; and
(b) any shares of Common Stock which have been sold in a private
transaction in which the transferor's rights under this Agreement are not
assigned.
2.2 Filing of Initial Registration Statement. The Company shall, by the
Filing Date, file a registration statement ("Registration Statement") on Form
S-3 (or other suitable form, at the Company's discretion, but subject to the
reasonable approval of Subscriber), covering the resale of a number of shares of
Common Stock as Registrable Securities equal to at least Fifteen Million
(15,000,000) shares of Common Stock and shall cover, to the extent allowed by
applicable law, such indeterminate number of additional shares of Common Stock
that may be issued or become issuable as Registrable Securities by the Company
pursuant to Rule 416 of the Act.
2.3 [Intentionally Left Blank].
2.4 Registration Effective Date. The Company shall use its best efforts to
have the Registration Statement declared effective by the SEC (the date of such
effectiveness is referred to herein as the "Effective Date") by the Due Date.
2.5 [Intentionally Left Blank].
2.6 [Intentionally Left Blank].
2.7 Shelf Registration. The Registration Statement shall be prepared as a
"shelf" registration statement under Rule 415, and shall be maintained effective
until all Registrable Securities are resold pursuant to such Registration
Statement.
2.8 Eligibility for Form S-3. The Company understands that in order to file
the resale Registration Statement described herein on Form S-3, it must be
eligible to file Form S-3 for primary offerings. The Company represents that it
is presently eligible to effect the registration contemplated hereby on Form S-3
and will use its best efforts to continue to take such actions as are necessary
to maintain such eligibility. The Company covenants to use its best efforts to
use Form S-3 (or other suitable form, at the Company's discretion, but subject
to the reasonable approval of the Holders) for the registration required by this
Section during all applicable times contemplated by this Agreement.
2.9 Supplemental Registration Statement for Additional Shares. Anytime the
Registration Statement does not cover a sufficient number of shares of Common
Stock to cover (i) all outstanding Registrable Securities plus (ii) all
Registrable Securities to be issued as Additional Shares, the Company shall
promptly prepare and file with the SEC such Supplemental Registration Statement
and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all such Registrable Securities and shall use its best efforts to
cause such Supplemental Registration Statement to be declared effective as soon
as possible.
2.10 Failure to Maintain Effectiveness of Registration Statement.
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(i) Payments During Registration Statement Ineffective Period. In the event
that the Registration Statement or any Supplemental Registration Statement
becomes ineffective or unavailable for use for the sale or resale, as
applicable, of any or all of the Registrable Securities for any reason (or in
the event the prospectus under either of the above is not current and
deliverable) during any time period required hereunder (the "Ineffective
Period"), the Company shall pay the Holder at a rate equal to the Accrual Rate
multiplied by a principal amount equal to the number of shares of Registrable
Securities held by Holder on the first day of the Ineffective Period, multiplied
by the Pre-Ineffective Price, accruing daily until a Registration Statement
covering the resale of all such Registrable Securities becomes effective and a
prospectus thereunder becomes current and deliverable, payable in cash or Common
Stock, at the Holder's option, as set forth in Section 2.11 below (the
"Ineffective Registration Payment"). For the purposes hereof, if a Registration
Statement is effective but does not cover a sufficient number of shares of
Common Stock to effect resales of all Registrable Securities, then a Holder
shall be entitled to an Ineffective Registration Payment for the Ineffective
Period only as to the number of shares of Registrable Securities held by such
Holder that are not covered under the Registration Statement.
(ii) Issuance of Additional Shares due to Price Drop During Registration
Statement Ineffective Period. In the event that an Ineffective Period occurs and
the lowest Closing Bid Price of the Common Stock for the ten (10) Trading Day
period beginning on the first Trading Day that the Registration Statement
becomes effective after the Ineffective Period (the "Post-Ineffective Price") is
less than the Closing Bid Price on the last Trading Day preceding such
Ineffective Period (the "Pre-Ineffective Price"), the Company shall issue to
Holder, no later than the fifteenth (15th) business day following the first
Trading Day after the end of the Ineffective Period, an additional number of
shares of Common Stock ("Additional Ineffective Period Shares") equal to (i) the
number of shares of Registrable Securities held by Holder on the first day of
the Ineffective Period multiplied by (ii) the difference of (x) the quotient
obtained when the Pre-Ineffective Price is divided by the Post-Ineffective
Price, minus (y) one (1). Any such shares of Common Stock issued to the Holder
as a result of any Ineffective Period shall also be deemed "Registrable
Securities" as defined herein.
2.11 Payment of Ineffective Registration Payment or Delisting Payment. Any
Ineffective Registration Payment or Delisting Payment (a "Payment") shall be
payable in cash or Common Stock, at the Holder's option, as follows: If Holder
elects to be paid in cash, such Payment shall be paid to such Holder within five
(5) business days following the end of the month in which such Payment was
accrued. If Holder elects to be paid in Common Stock, the Company shall issue to
Holder, within five (5) business days following the end of the month in which
such Payment was accrued, a number of shares of Common Stock equal to the
quotient of (i) the dollar amount of such Payment, divided by (ii) the lowest
Closing Bid Price of the Common Stock for the ten (10) Trading Days immediately
preceding the last Trading Day of the month in which such payment was accrued.
Any such shares of Common Stock issued to the Holder as a result of any Payment
shall also be deemed "Registrable Securities" as defined herein.
2.12 Failure to Maintain Listing of Common Stock. In the event that, at any
time during the term of the Subscription Agreement, the Company's Common Stock
is not listed for and actively trading on either the Nasdaq National Market,
Nasdaq Small Cap Market, or New York Stock Exchange or is suspended or delisted
with respect to the trading of the shares of Common Stock on such market or
exchange (a "Delisting Event"), the Company shall pay the Holder at a rate equal
to the Accrual Rate multiplied by a principal amount equal to the number of
shares of Registrable Securities held by Holder on the first day of the
Delisting Event, multiplied by the Pre-Delisting Event Price, accruing daily
until the Holder's shares of Common Stock become listed for and actively trading
on either the Nasdaq National Market, Nasdaq
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Small Cap Market, or the New York Stock Exchange, payable in cash or Common
Stock, at the Holder's option, as set forth in Section 2.11 above (the
"Delisting Payment").
In the event that a Delisting Event occurs and the lowest Closing Bid Price
of the Common Stock for the ten (10) Trading Day period beginning on the first
Trading Day that the Company's Common Stock is actively listed and trading on
either the Nasdaq National Market, the Nasdaq Small Cap Market or New York Stock
Exchange (the "Post-Delisting Event Price") is less than the Closing Bid Price
on the last Trading Day preceding such Delisting Event (the "Pre-Delisting Event
Price"), the Company shall issue to Holder, no later than the fifteenth (15th)
business day following the first Trading Day after the end of the Delisting
Event, an additional number of shares of Common Stock ("Additional Delisting
Event Shares") equal to (i) the number of shares of Registrable Securities then
held by Holder multiplied by (ii) the difference of (x) the quotient obtained
when the Pre-Delisting Event Price is divided by the Post-Delisting Event Price,
minus (y) one (1). Any such shares of Common Stock issued to the Holder as a
result of any Delisting Event shall also be deemed "Registrable Securities" as
defined herein.
3. Obligations of the Company. Whenever required under this Agreement to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously and reasonably possible:
(a) Prepare and file with the Securities and Exchange Commission ("SEC") a
Registration Statement with respect to such Registrable Securities and use its
best efforts to cause such Registration Statement to become effective and to
remain effective until all Registrable Securities are resold pursuant to such
Registration Statement.
(b) Prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement ("Amended Registration Statement") or prepare and file
any additional registration statement ("Additional Registration Statement,"
together with the Amended Registration Statement, "Supplemental Registration
Statements") as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such Registration
Statement or such prior registration statement and to cover the resale of all
Registrable Securities.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such Registration Statement under such other securities or Blue Sky laws of the
jurisdictions in which the Holders are located and of such other jurisdictions
as shall be reasonably requested by the Holders of the Registrable Securities
covered by such Registration Statement, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) [Intentionally Omitted].
(f) As promptly as practicable after becoming aware of such event, notify
each Holder of Registrable Securities of the happening of any event of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
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which they were made, not misleading, use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver a number of copies of such supplement or
amendment to each Holder as such Holder may reasonably request.
(g) Provide Holders with notice of the date that a Registration Statement
or any Supplemental Registration Statement registering the resale of the
Registrable Securities is declared effective by the SEC, and the date or dates
when the Registration Statement is no longer effective.
(h) Provide Holders and their representatives the opportunity and a
reasonable amount of time, based upon reasonable notice delivered by the
Company, to conduct a reasonable due diligence inquiry of Company's pertinent
financial and other records and make available its officers and directors for
questions regarding such information as it relates to information contained in
the Registration Statement.
(i) Provide Holders and their representatives the opportunity to review the
Registration Statement and all amendments or supplements thereto prior to their
filing with the SEC by giving the Holder at least ten (10) business days advance
written prior to such filing; provided that if the Holders or their
representatives take more than ten (10) business days for such review and as a
direct result the Company cannot file the Registration Statement by the date it
is required to be filed hereunder.
(j) Provide each Holder with prompt notice of the issuance by the SEC or
any state securities commission or agency of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceeding
for such purpose. The Company shall use its best efforts to prevent the issuance
of any stop order, and, if any is issued to obtain the removal thereof at the
earliest possible date.
(k) Use its best efforts to list the Registrable Securities covered by the
Registration Statement with all securities exchanges or markets on which the
Common Stock is then listed and prepare and file any required filing with the
NASD and any other exchange or market on which the Common Stock is listed.
4. [Intentionally Omitted].
5. [Intentionally Omitted].
6. Dispute as to Registrable Securities. In the event the Company believes
that shares sought to be registered under Section 2 by Holders do not constitute
"Registrable Securities" by virtue of Section 2.1 of this Agreement, and the
status of those shares as Registrable Securities is disputed, the Company shall
provide, at its expense, an Opinion of Counsel, reasonably acceptable to the
Holders of the Securities at issue (and satisfactory to the Company's transfer
agent to permit the sale and transfer) that those securities may be sold
immediately, without volume limitation or other material restrictions, without
registration under the Act, by virtue of Rule 144 or similar provisions.
7. Furnish Information. At the Company's request, each Holder shall furnish
to the Company such information regarding Holder, the Registrable Securities
held by it, and the intended method of disposition of such securities to the
extent required to effect the registration of its Registrable Securities or to
determine that registration is not required pursuant to Rule 144 or other
applicable provision of the Act. The Company shall include all information
provided by such Holder pursuant hereto in the Registration Statement,
substantially in the form supplied,
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except to the extent such information is not permitted by law.
8. Expenses. All expenses, other than commissions and fees and expenses of
counsel to the selling Holders, incurred in connection with registrations,
filings or qualifications pursuant hereto, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, shall be borne by the Company.
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9. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers, directors, partners, legal counsel, and
accountants of each Holder, any underwriter (as defined in the Act, or as deemed
by the Securities Exchange Commission, or as indicated in a registration
statement) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of Section 15 of the Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements or omissions: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, and
the Company will reimburse each such Holder, officer or director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 9(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, officer, director, underwriter or controlling
person; provided however, that the above shall not relieve the Company from any
other liabilities which it might otherwise have.
(b) Promptly after receipt by an indemnified party under this Section 9 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 9, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonably incurred fees and expenses of one such counsel to
be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential conflicting interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 9.
(c) In the event that the indemnity provided in paragraph (a) of this
Section 9 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and each Holder agree to contribute to the
aggregate claims, losses, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and one or more of the Holder may
be subject in such proportion as is appropriate to reflect the relative fault of
the
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Company and the Holders in connection with the statements or omissions which
resulted in such Losses. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the Company or by the Holders. The Company and the Holders agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 10(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person who controls a
Holder of Registrable Securities within the meaning of either the Securities Act
or the Exchange Act and each director, officer, partner, employee and agent of a
Holder shall have the same rights to contribution as such holder, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act and each director and officer of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (c).
(d) The obligations of the Company and Holders under this Section 9 shall
survive the resale, if any, of the Common Stock, the completion of any offering
of Registrable Securities in a Registration Statement under this Agreement, and
otherwise.
10. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144; and
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act.
11. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the written consent of each Holder affected
thereby. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder, each future Holder, and the Company.
12. Notices. All notices required or permitted under this Agreement shall
be made in writing signed by the party making the same, shall specify the
section under this Agreement pursuant to which it is given, and shall be
addressed if to (i) the Company at: Viragen, Inc., ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile No. (954)
233-1416 and (ii) the Holders at their respective last address as the party as
shown on the records of the Company. Any notice, except as otherwise provided in
this Agreement, shall be made by fax and shall be deemed given at the time of
transmission of the fax.
13. Termination. This Agreement shall terminate on the date all Registrable
Securities cease to exist (as that term is defined in Section 2.1 hereof); but
without prejudice to (i) the parties' rights and obligations arising from
breaches of this Agreement occurring prior to such termination (ii) other
indemnification obligations under this Agreement.
14. Assignment. No assignment, transfer or delegation, whether by operation
of law or otherwise, of any rights or obligations under this Agreement by the
Company or any Holder,
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respectively, shall be made without the prior written consent of the majority in
interest of the Holders or the Company, respectively; provided that the rights
of a Holder may be transferred to a subsequent holder of the Holder's
Registrable Securities (provided such transferee shall provide to the Company,
together with or prior to such transferee's request to have such Registrable
Securities included in a Registration, a writing executed by such transferee
agreeing to be bound as a Holder by the terms of this Agreement), and the
Company hereby agrees to file an amended registration statement including such
transferee or a selling security holder thereunder; and provided further that
the Company may transfer its rights and obligations under this Agreement to a
purchaser of all or a substantial portion of its business if the obligations of
the Company under this Agreement are assumed in connection with such transfer,
either by merger or other operation of law (which may include without limitation
a transaction whereby the Registrable Securities are converted into securities
of the successor in interest) or by specific assumption executed by the
transferee.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
in and wholly to be performed in that jurisdiction, except for matters arising
under the Act or the Securities Exchange Act of 1934, which matters shall be
construed and interpreted in accordance with such laws.
16. Execution in Counterparts Permitted. This Agreement may be executed in
any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one (1) instrument.
17. Specific Performance. The Holder shall be entitled to the remedy of
specific performance in the event of the Company's breach of this Agreement, the
parties agreeing that a remedy at law would be inadequate.
18. Indemnity. Each party shall indemnify each other party against any and
all claims, damages (including reasonable attorney's fees), and expenses arising
out of the first party's breach of any of the terms of this Agreement.
19. Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Subscription Agreements, the Common
Stock certificates, and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of this
22nd day of September, 1998.
VIRAGEN, INC.
By: ________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice
President/CFO
Address: Viragen, Inc.
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ INVESTMENTS, LLC. d/b/a
▇▇▇▇▇▇ INSTITUTIONAL FINANCE
By: ________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇. ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SUBSCRIBER(S)
-----------------------------------
Subscriber's Name
By:_________________________________
(Signature)
Address: ____________________________________
------------------------------------
------------------------------------
56
Exhibit (10)(LXII).03
PLACEMENT AGENT AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 22nd day of September, 1998,
by and between Viragen, Inc., a corporation organized under the laws of the
state of Delaware ("Company"), and ▇▇▇▇▇▇ Investments LLC, a Georgia limited
liability company, d/b/a ▇▇▇▇▇▇ Institutional Finance (the "Placement Agent").
RECITALS:
WHEREAS, the Company proposes to issue and sell that certain Regulation D
Private Equity Line Subscription Agreement (the "Private Equity Line Agreement")
and shares of its Common Stock issued in connection therewith, which are
accompanied by a warrant or warrants to purchase a number of shares of Common
Stock of the Company (together the "Securities") resulting in gross proceeds to
the Company of a maximum of Twenty Million Dollars ($20,000,000), excluding
Warrants, in an offering (the "Offering") not involving a public offering under
the Securities Act of 1933, as amended (the "Act"), pursuant to an exemption
from the registration requirements of the Act under Regulation D promulgated
under the Act ("Regulation D"), as described below; and
WHEREAS, the Placement Agent has offered to assist the Company in placing
the Private Equity Line Agreement on a "best efforts" basis with respect to
sales of Securities thereafter up to the Maximum Proceeds (as defined below),
and the Company desires to secure the services of the Placement Agent on the
terms and conditions hereinafter set forth.
TERMS:
NOW, THEREFORE, in consideration of the premises and the mutual promises,
conditions and covenants herein contained, the parties hereto do hereby agree as
follows:
1. ENGAGEMENT OF PLACEMENT AGENT. The Company on the basis of the
representations and warranties contained herein, but subject to the terms and
conditions herein set forth, hereby appoints the Placement Agent as its
exclusive placement agent for this Offering, to sell, on a "best efforts basis,"
a maximum dollar amount of Securities, excluding Warrants, resulting in gross
proceeds to the Company of Twenty Million Dollars ($20,000,000) (the "Maximum
Proceeds"). The Placement Agent, on the basis of the representations and
warranties herein contained, but subject to the terms and conditions herein set
forth, accepts such appointment and agrees to use its best efforts to find
purchasers for the Private Equity Line Agreement. This appointment shall be
irrevocable for the period commencing on the date of the executed Letter of
Agreement, and ending on the earlier of (i) the Put Closing Date on which the
aggregate of the Put Dollar Amounts for all Put Closings equal the Maximum
Offering Amount pursuant to the Private Equity Line Agreement, or (ii) September
30, 2001.
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to induce the
Placement Agent to enter into this Agreement, the Company hereby represents and
warrants to and agrees with the Placement Agent as follows:
2.1 Offering Documents. The Company (with the assistance of the Placement
Agent) has prepared the Private Equity Line Agreement, certain exhibits thereto,
investor Warrants and a Registration Rights Agreement, which documents have been
or will be sent to proposed investors. In addition, proposed investors have
received or will receive prior to the Private Equity Line Commitment Closing (as
defined in the Private Equity Line Agreement), copies of the Company's Annual
Report on Form 10-K for the year ended June 30, 1997 and the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 1998 ("SEC Documents"). The
SEC Documents were prepared in conformity with the requirements (to the extent
applicable) of the Securities Exchange Act of 1934, as amended, (the "`34 Act")
and the rules and regulations ("Rules and Regulations") of the Commission
promulgated thereunder. As used in this Agreement, the term "Offering Documents"
refer to and mean the SEC Documents, the Private Equity Line Agreement and all
amendments, exhibits and supplements thereto, together with any other documents
which are provided to the Placement Agent by, or approved for Placement Agent's
use by, the Company for the purpose of this Offering (including, but not limited
to, the Registration Rights Agreement).
2.2 Provision of Offering Documents. The Company shall deliver to the
Placement Agent, without charge, as many copies of the Offering Documents as the
Placement Agent may reasonably require for the purposes contemplated by this
Agreement. The Company authorizes the Placement Agent, in connection with the
Offering of the Private Equity Line Agreement, to use the Offering Documents as
from time to time amended or supplemented in connection with the offering and
sale of the Private Equity Line Agreement and in accordance with the applicable
provisions of the Act and Regulation D.
2.3 Accuracy of Offering Documents. The Offering Documents, at the time of
delivery to Subscribers for the Securities, conformed in all material respects
with the requirements, to the extent applicable, of the `34 Act and the
applicable Rules and Regulations and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. On any Closing Date (as hereinafter
defined), the Offering Documents will contain all statements which are required
to be stated therein in accordance with the Act and the Rules and Regulations
for the purposes of the proposed Offering, and all statements of material fact
contained in the Offering Documents will be true and correct, and the Offering
Documents will not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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2.4 Duty to Amend. If during such period of time as in the reasonable
opinion of the Placement Agent or its counsel an Offering Document relating to
this financing is required to be delivered under the Act, any event occurs or
any event known to the Company relating to or affecting the Company shall occur
as a result of which the Offering Documents as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time after the date hereof to amend or supplement the Offering Documents
to comply with the Act or the applicable Rules and Regulations, the Company
shall forthwith notify the Placement Agent thereof and shall prepare such
further amendment or supplement to the Offering Documents as may be required and
shall furnish and deliver to the Placement Agent and to others, whose names and
addresses are designated by the Placement Agent, all at the cost of the Company,
a reasonable number of copies of the amendment or supplement (or of the amended
or supplemented Offering Documents) which, as so amended or supplemented, will
not contain an untrue statement of a material fact or omit to state any material
fact necessary in order to make the Offering Documents not misleading in the
light of the circumstances when delivered to a purchaser or prospective
purchaser, and which will comply in all respects with the requirements (to the
extent applicable) of the `34 Act and the applicable Rules and Regulations.
2.5 Corporation Condition. The Company's condition is as described in its
Offering Documents, except for continuing losses and changes in the ordinary
course of business and normal year-end adjustments that are not in the aggregate
materially adverse to the Company. The Offering Documents, taken as a whole,
present fairly the business and financial position of the Company as of any
Closing Date.
2.6 No Material Adverse Change. Except as may be reflected in or
contemplated by the Offering Documents, subsequent to the dates as of which
information is given in the Offering Documents, and prior to any Closing Date,
taken as a whole, there has not been any material adverse change in the
condition, financial or otherwise, or in the results of operations of the
Company or in its business.
2.7 No Defaults. Except as disclosed in the Offering Documents or in
writing to the Placement Agent, the Company is not in default in any material
respect in the performance of any obligation, agreement or condition contained
in any material debenture, note or other evidence of indebtedness or any
material indenture or loan agreement of the Company. The execution and delivery
of this Agreement, and the consummation of the transactions herein contemplated,
and compliance with the terms of this Agreement will not conflict with or result
in a breach of any of the terms, conditions or provisions of, or constitute a
default under, the Certificate of Incorporation or By-Laws of the Company (in
any respect that is material to the Company), any material note, indenture,
mortgage, deed of trust, or other agreement or instrument to which the Company
is a party or by which the Company or any property of the Company is bound, or
to the Company's knowledge, any existing law, order, rule, regulation, writ,
injunction
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59
or decree of any government, governmental instrumentality, agency or body,
arbitration tribunal or court, domestic or foreign, having jurisdiction over the
Company or any property of the Company. The consent, approval, authorization or
order of any court or governmental instrumentality, agency or body is not
required for the consummation of the transactions herein contemplated except
such as may be required under the Act or under the Blue Sky or securities laws
of any state or jurisdiction.
2.8 Incorporation and Standing. The Company is, and at any Closing Date
will be, duly formed and validly existing in good standing as a corporation
under the laws of the State of Delaware and with full power and authority
(corporate and other) to own its properties and conduct its business, present
and proposed, as described in the Offering Documents; the Company, has full
power and authority to enter into this Agreement; and the Company is duly
qualified and in good standing as a foreign entity in each jurisdiction in which
the failure to so qualify would have a material adverse effect on the Company or
its properties.
2.9 Legality of Outstanding Securities.Prior to any Closing Date, the
outstanding securities of the Company have been duly and validly authorized and
issued, and are fully paid and non-assessable, and conform in all material
respects to the statements with regard thereto contained in the Offering
Documents.
2.10 Legality of Securities. The Securities when sold and delivered in
accordance with the Offering Documents, and the Placement Agent Warrants (as
defined in Section 3.4 below) when issued and delivered, will constitute legal,
valid and binding obligations of the Company, enforceable in accordance with the
terms thereof, and the Securities shall be duly and validly issued and
outstanding, fully paid and nonassessable. The Common Stock into which any
Securities are exercisable and the Common Stock into which any of Placement
Agent's Warrants are exercisable, when issued upon exercise of any Securities or
upon exercise of any of Placement Agent's Warrants, as applicable, shall be duly
and validly issued and outstanding, fully paid and non-assessable.
2.11 Litigation. Except as set forth in the Offering Documents, there is
now, and at any Closing Date there will be, no action, suit or proceeding before
any court or governmental agency, authority or body pending or, to the knowledge
of the Company, threatened, which might result in judgments against the Company
not adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise) or business of
the Company or which would materially adversely affect the properties or assets
of the Company.
2.12 Finders. The Company does not know of any outstanding claims for
services in the nature of a finder's fee or origination fees with respect to the
sale of the Private Equity Line Agreement hereunder for which the Placement
Agent may be responsible, and the Company will indemnify the Placement Agent
from any liability for such fees (including the payment of attorney's fees
incurred by Placement Agent due
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to any claim by any such finder or originator) by any party who, in the
reasonable opinion of Placement Agent's counsel, has a legitimate claim for such
compensation from the Company and for which person the Placement Agent is not
legally responsible. In the event of such claim, Placement Agent shall properly
notify Company thereof and the Company may, at its option and at its sole cost
and expense, take over the defense of such a claim with counsel of its choice,
reasonably satisfactory to Placement Agent. Placement Agent shall not settle any
such claims or litigation arising hereunder without the prior written consent of
the Company, which shall not be unreasonably withheld.
2.13 Tax Returns. The Company has filed all federal and state and local tax
returns which are required to be filed, and has paid all material taxes shown on
such returns and on all assessments received by it to the extent such taxes have
become due (except for taxes the amount of which the Company is contesting in
good faith). All taxes with respect to which the Company is obligated have been
paid, or adequate accruals have been set up to cover any such unpaid taxes.
2.14 Authority. The execution and delivery by the Company of this Agreement
have been duly authorized by all necessary action, and this Agreement is the
valid, binding and legally enforceable obligation of the Company except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws, by principles governing enforcement of
equitable remedies and, with respect to indemnification against liabilities
under the Act, matters of public policy.
2.15 Actions by the Company. The Company will not take any action which
will impair the effectiveness of the transactions contemplated by this
Agreement.
3. ISSUE, SALE AND DELIVERY OF THE SECURITIES.
3.1 Deliveries of Securities. Certificates in such form that, subject to
applicable transfer restrictions as described in the Private Equity Line
Agreement, they can be negotiated by the purchasers thereof (issued in such
denominations and in such names as the Subscriber may direct the Company to
issue) for the Securities, shall be delivered by the Company to the Subscriber
or the Subscriber's agent as specified in the Private Equity Line Agreement,
with copies made available to the Subscriber for checking at least one (1) full
business day prior to any Closing Date, it being understood that any directions
from the Subscriber to the Company regarding denominations or names shall be
given at least two (2) full business days prior to any Closing Date. The
certificates for the Securities shall be delivered at each Put Closing (as
defined hereinafter).
3.2 Payment of Funds.Pursuant to the Private Equity Line Agreement, the
Subscriber shall deliver all funds, as specified in Section 2.3.7 of the Private
Equity Line Agreement, for purchase of Securities with respect to any Put (as
defined in the Private Equity Line Agreement) exercised by the Company.
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3.3 Closing Date. The Private Equity Line Commitment Closing shall take
place at the offices of the Placement Agent. Any subsequent Put Closing shall
take place at the offices of the Subscriber or Subscriber's agent on each Put
Closing Date as specified in the Private Equity Line Agreement. For purposes
hereof, "Put Closing" and "Put Closing Date" shall have the meanings as set
forth in Private Equity Line Agreement. The date of the Private Equity Line
Commitment Closing and any Put Closing Date shall be referred to herein as the
"Closing Date."
3.4 Placement Agent's Compensation. Subject to cancellation under Sections
12.2 and 12.3, the Company shall pay the Placement Agent the following, which
shall be the full amount payable to the Placement Agent for its services, as
fees and expenses, in connection with this Offering:
A cash placement fee ("Cash Placement Fee") equal to "X" percent (X%) of the
gross proceeds resulting from the sale of the securities in any Put, wherein "X"
is based on the aggregate amount of securities placed to date as follows:
Aggregate Amount Placed "X"
----------------------- ---
First $5M 7%
$5M-$10M 6%
$10M plus 3.5%
On each Six Month Anniversary of the Subscription Date, if the Placement Agent
has not received at least $100,000 in Cash Placement Fees for the preceding six
(6) Calendar Months, the Company shall pay to the Placement Agent an amount
equal to (the "Semi-Annual Cash Fee Shortfall") the difference of (i) $100,000,
minus (ii) the amount of the Cash Placement Fee paid to the Placement Agent
during the preceding six (6) Calendar Months (as defined in the Private Equity
Line Agreement). In the event that the Company delivers a Termination Notice to
the Subscriber, the Company shall pay to the Placement Agent the greater of (i)
$100,000, less the fee on amounts put to the Subscriber in that six (6) month
period, or (ii) the difference of (x) $200,000, minus (y) the aggregate of the
Cash Placement Fees for all Puts to date, and the Company shall not be required
to pay the Semi-Annual Cash Fee Shortfall thereafter.
3.5 Placement Agent's Warrants. In addition to the fees and reimbursement
of costs set forth above, within five (5) business days after each Six Month
Anniversary of the Subscription Date as specified in the Private Equity Line
Agreement, the Company shall also issue to Placement Agent or its designees the
following warrants ("Placement Agent Warrants"): (i) a warrant to purchase a
number of shares of the Company's Common Stock equal to "X" percent (X%) of the
number of shares of Put Shares of Common Stock issued to the Subscriber pursuant
to any Put as specified in the Private Equity Line Agreement during the
preceding six (6) month period, exercisable at one hundred twenty five percent
(125%) of the average Put Share Price of all such Put Shares issued during the
preceding six (6) calendar months; and (ii) a
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warrant to purchase a number of shares of the Company's Common Stock equal to
"X" percent (X%), as specified above, of the number of shares of Common Stock
for which the Subscriber is entitled to purchase pursuant to each Purchase
Warrant issued to the Subscriber on that Six Month Anniversary Date,
exerciseable at a price which shall equal 108% of the lowest Closing Bid Price
for the ten (10) trading days immediately preceding the applicable Six Month
Anniversary.
The term of the Placement Agent Warrants shall be five (5) years commencing
on the date of issuance thereof. The Placement Agent Warrants shall be
exercisable immediately upon issuance and shall have cashless exercise
provisions. The shares of Common Stock issuable upon exercise of the Placement
Agent Warrants shall be included in the next registration statement filed by the
Company, and shall have the rights set forth in the Registration Rights
Agreement, dated on or about September 18, 1998, by and among the Company, the
Placement Agent, and the Subscriber. The Placement Agent Warrants shall be
delivered by the Company to the Placement Agent within five (5) Trading Days of
each Six Month Anniversary Date. Concurrently with the issuance and delivery of
the Purchase Warrant to the Subscriber, the Company shall deliver to the
Subscriber a Purchase Warrant Opinion of Counsel (signed by the Company's
independent counsel).
3.6 Payment of Fees. The Company shall pay all Cash Placement Fees directly
to the Placement Agent pursuant to wire instructions to be provided to the
Company by the Placement Agent, and from the proceeds of all Put Closings,
simultaneous with the transfer of proceeds to the Company resulting from such
Put Closing. The Company shall pay any Semi-Annual Cash Fee Shortfall to the
Subscriber within five (5) business days of the applicable Six Month Anniversary
pursuant to wire instructions to be provided to the Company by the Placement
Agent.
3.7 Press Release. The Placement Agent shall have the right to review and
comment upon any press release issued by the Company in connection with the
Offering.
4. OFFERING OF THE SECURITIES ON BEHALF OF THE COMPANY.
4.1 In offering the Private Equity Line Agreement for sale, the Placement
Agent shall offer them solely as an agent for the Company, and such offer shall
be made upon the terms and subject to the conditions set forth in the Offering
Documents. The Placement Agent shall commence making such offer as an agent for
the Company as soon as possible following delivery of the final Company approved
Offering Documents to Placement Agent (or notification by Company or its Counsel
that the latest version of any Offering Documents on Placement Agent's computer
system is acceptable for faxing to Subscribers).
4.2 The Placement Agent will only make offers to sell the Private Equity
Line Agreement to, or solicit offers to subscribe for any Private Equity Line
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Agreement from, persons or entities that Placement Agent reasonably believes are
"accredited investors" as defined in Regulation D.
5. RIGHT OF FIRST REFUSAL. The Company hereby grants Placement Agent rights
of first refusal as follows:
5.1 The Placement Agent has the right of first refusal to act as placement
agent for any future financings of the Company, including any financings that
involve the participation of an underwriter, under which the Company issues or
sells, or agrees to issue or sell, for cash (a) any debt or equity securities
which are convertible into, exercisable or exchangeable for, or carry the right
to receive additional shares of Common Stock either (i) at any conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for Common Stock at any time after the
initial issuance of such debt or equity security, (ii) with a fixed conversion,
exercise or exchange price, or (iii) with a fixed conversion, exercise or
exchange price that is subject to being reset at some future date at any time
after the initial issuance of such debt or equity security or upon the
occurrence of specified contingent events directly or indirectly related to the
business of the Company or the market for the Common Stock, (b) any securities
of the Company pursuant to an equity line structure or format similar in nature
to this Offering or otherwise, or (c) any Common Stock or units (i.e. Common
Stock accompanied by warrants) of the Company, excluding joint ventures,
mergers, acquisitions, or similar transactions. Notwithstanding the above, the
Placement Agent shall not be entitled to a right of first refusal under this
sub-section with respect to a VUSA Transaction (as defined in the Private Equity
Line Agreement). The duration of the Placement Agent's right of first refusal
under this Section 5.1 shall be for a period from the date of this Agreement
until the earlier of (i) the date that is three (3) years following the date of
the Private Equity Line Commitment Closing (as defined in the Private Equity
Line Agreement), or (ii) (a) in the case of a Company Equity Line Termination
(as defined in the Private Equity Line Agreement), the date that is one (1) year
after the date of such Company Equity Line Termination, or (b) in the case of an
Automatic Equity Line Termination Closing (as defined in the Subscription
Agreement) that is not waived by the Subscriber, the date that is six (6) months
after the date of such Automatic Equity Line Termination.
5.2 In the event that the Company wishes to undertake a transaction
described in this Section 5, the Company must send Placement Agent a written
notice of the proposed transaction (whether the transaction is initiated by the
Company or is offered to the Company by a third party), in sufficient
specificity to allow the Placement Agent to understand the proposed transaction
clearly. This notice must be delivered to Placement Agent at least twenty (20)
days prior to the proposed closing of the transaction. The Placement Agent shall
have fifteen (15) days from receipt of that notice to determine whether or not
it wishes to exercise its right of first refusal with respect to that
transaction. The Placement Agent shall notify the Company in writing of its
decision to exercise or waive its right of first refusal with respect to the
transaction described in the notice. If the Placement Agent waives its right of
first refusal with respect to a
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particular transaction, the Company may proceed with that transaction; provided,
however, that if prior to any Closing in the proposed transaction the terms of
the transaction are changed in any material way from the terms set forth in the
notice to the Placement Agent, the Placement Agent's right of first refusal
shall commence again. Placement Agent's waiver of its rights of first refusal
with respect to any specific transaction shall not act as a waiver of its rights
with respect to future transactions within the applicable time period.
5.3 In the event that Company breaches Section 5.1 of this Agreement,
Placement Agent shall be entitled to receive compensation based upon the
aggregate purchase price of securities placed in such transaction in an amount
calculated pursuant to Section 3.4 hereof.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Placement Agent that:
6.1 After the date hereof, the Company will not at any time, prepare and
distribute any amendment or supplement to the Offering Documents (other than the
Company's 10-Q's, 10-K's and period reports filed with the SEC), of which
amendment or supplement the Placement Agent shall not previously have been
advised and the Placement Agent and its counsel furnished with a copy within a
reasonable time period prior to the proposed adoption thereof, or to which the
Placement Agent shall have reasonably objected in writing on the ground that it
is not in compliance with the Act or the Rules and Regulations (if applicable).
6.2 The Company will pay, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming effective
or is terminated, all costs and expenses incident to the performance of its
obligations under this Agreement, including all expenses incident to the
authorization of the Securities and their issue and delivery to the Placement
Agent, any original issue taxes in connection therewith, all transfer taxes, if
any, incident to the initial sale of the Securities, the fees and expenses of
the Company's counsel and accountants, the cost of reproduction and furnishing
to the Placement Agent copies of the Offering Documents as herein provided;
provided, however, that the Company shall not be responsible for the direct
payment of fees and costs incurred by Placement Agent, including attorney's fees
of or any costs incurred by the Placement Agent's counsel.
6.3 As a condition precedent to any Closing, the Company will deliver to
the Placement Agent a true and correct copy of all documents requested by
Placement Agent included in Placement Agent's due diligence request, including
but not limited to the Certificate of Incorporation of the Company, and all
amendments and certificates of designation of preferences of preferred stock,
certified by the Secretary of State of the State of Delaware.
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6.4 Prior to any Closing Date, the Company will cooperate with the
Placement Agent in such investigation as it may make or cause to be made of all
of the properties, business and operations of the Company in connection with the
Offering of the Securities. The Company will make available to it in connection
therewith such information in its possession as the Placement Agent may
reasonably request and will make available to the Placement Agent such persons
as the Placement Agent shall deem reasonably necessary and appropriate in order
to verify or substantiate any such information so supplied.
6.5 The Company shall be responsible for making any and all filings
required by the Blue Sky authorities of the State of Delaware and filings
required by the laws of the jurisdictions in which the Subscribers who are
accepted for purchase of Private Equity Line Agreement are located, if any.
7. NON-CIRCUMVENTION & CONFIDENTIALITY OF PROPRIETARY PLACEMENT AGENT
INFORMATION.
7.1. Non-Circumvention. The investors who participate in the Offering and
the other investors who are listed on the schedule attached hereto as Exhibit B
shall be considered, for purposes of this Agreement, the Placement Agent's
proprietary clients. The Company on behalf of itself, its parent or its
subsidiaries (collectively hereinafter referred to as "Company") agree not to
circumvent, directly or indirectly, Placement Agent's relationship with these
investors, their parents or any of the investors' subsidiaries or affiliates
(collectively hereinafter referred to as "Investors") and Company will not
directly or indirectly contact or negotiate with any of these Investors
regarding an investment in the Company, or any other company, and will not enter
into any agreement or transaction with Investors, or disclose the names of
Investors, except as such disclosure may be required by any law, rule,
regulation, regulatory body, court or administrative agency, for a period of
time beginning on the date hereof and ending on the date that is three (3) years
after the date of the Private Equity Line Commitment Closing without the prior
written approval of Placement Agent; provided, however, that notwithstanding the
above, nothing contained in this Agreement shall prevent Company from, directly
or indirectly, contacting or negotiating with the Investors in satisfaction of
Company's obligations under the Private Equity Line Agreements entered into in
connection herewith. In the event that the Company, with ▇▇▇▇▇▇'▇ advance
written permission, accepts an investment (a "Subsequent Investment") from an
Investor or Investors (other than in a public offering) in a placement being
arranged without an agent or through an agent other than the Placement Agent,
during the period beginning on the date hereof and terminating on the third
(3rd) anniversary of the date of the Private Equity Line Commitment Closing, the
Company agrees to pay to the Placement Agent a cash fee equal to five percent
(5%) of all amounts invested by any such Investor or Investors. In the event
that the Company accepts a Subsequent Investment without ▇▇▇▇▇▇'▇ advance
written permission, the Company agrees to pay to the Placement Agent a cash fee
equal to ten percent (10%) of all amounts invested by any such Investor or
Investors.
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7.2 Specific Performance and Attorneys Fees. The Company acknowledges and
agrees that, if it breaches its obligations under Section 7.1, damages at law
will be an insufficient remedy to Placement Agent and that Placement Agent would
suffer irreparable damage as a result of such violation. Accordingly, it is
agreed that Placement Agent shall be entitled, upon application to a court of
competent jurisdiction, to obtain injunctive relief against the breaching party
to enforce the provisions of such sections, which injunctive relief shall be in
addition to any other rights or remedies available to Placement Agent. The
Company agrees to pay to Placement Agent (severally and not jointly) all costs
and expenses incurred by Placement Agent relating to the enforcement of the
terms of Section 7.1 hereof due to its own actions, whether by injunction, a
suit for damages or both, including reasonable fees and disbursements of counsel
(both at trial and in appellate proceedings).
8. INDEMNIFICATION.
8.1 The Company agrees to indemnify and hold harmless the Placement Agent,
each person who controls the Placement Agent within the meaning of Section 15 of
the Act and the Placement Agent's employees, accountants, attorneys and agents
(the "Placement Agent's Indemnitees") against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act or the `34 Act or any other statute or at common
law and for any reasonable legal or other expenses (including the costs of any
investigation and preparation) incurred by them in connection with any
litigation, whether or not resulting in any liability, but only insofar as such
losses, claims, damages, liabilities and litigation arise out of or are based
upon (i) the Company's breach of its obligations under the Private Equity Line
Agreement to deliver shares of Common Stock to a Subscriber upon submission by
Subscriber of the required documentation, or (ii) any untrue statement of
material fact contained in the Offering Documents or any amendment or supplement
thereto or any application or other document filed in any state or jurisdiction
in order to qualify the Securities under the Blue Sky or securities laws
thereof, or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, under the circumstances
under which they were made, not misleading, all as of the date of the Offering
Documents or of such amendment as the case may be, or (iii) any breach of any
representation, warranty or covenant made by the Company in this Agreement;
provided, however, that the indemnity agreement contained in this Section 8.1
shall not apply to amounts paid in settlement of any such litigation, if such
settlements are made without the consent of the Company (but no such settlement
may be made without the Company's prior written consent, which consent shall not
be unreasonably withheld), nor shall it apply to the Placement Agent's
Indemnitees in respect to any such losses, claims, damages or liabilities
arising out of or based upon any such untrue statement or alleged untrue
statement or any such omission or alleged omission, if such statement or
omission was made in reliance upon information furnished in writing to the
Company by the Placement Agent specifically for use in connection with the
preparation of the Offering Documents or any such amendment or supplement
thereto or any application or other
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document filed in any state or jurisdiction in order to qualify the Securities
under the Blue Sky or securities law thereof. This indemnity agreement is in
addition to any other liability which the Company may otherwise have to the
Placement Agent's Indemnitees. The Placement Agent's Indemnitees agree, within
ten (10) days after the receipt by them of written notice of the commencement of
any action against them in respect to which indemnity may be sought from the
Company under this Section 8.1, to notify the Company in writing of the
commencement of such action; provided, however, that the failure of the
Placement Agent's Indemnitees to notify the Company of any such action shall not
relieve the Company from any liability which it may have to the Placement
Agent's Indemnitees on account of the indemnity agreement contained in this
Section 8.1, except with respect to any failure which irreparably prejudices the
Company or causes an event of adjudication materially adverse to the Company.
The Company shall not be relieved from any other liability which it may have to
the Placement Agent's Indemnitees, and if the Placement Agent's Indemnitees
shall notify the Company of the commencement thereof, the Company shall be
entitled to participate in (and, to the extent that the Company shall wish, to
direct) the defense thereof at its own expense, but such defense shall be
conducted by counsel of recognized standing and reasonably satisfactory to the
Placement Agent's Indemnitees, defendant or defendants, in such litigation. The
Company agrees to notify the Placement Agent's Indemnitees promptly of the
commencement of any litigation or proceedings against the Company or any of the
Company's officers or directors of which the Company may be advised in
connection with the issue and sale of any of the Securities and to furnish to
the Placement Agent's Indemnitees, at their request, copies of all pleadings
therein and to permit the Placement Agent's Indemnitees to be observers therein
and apprise the Placement Agent's Indemnitees of all developments therein, all
at the Company's expense.
9. LIQUIDATED DAMAGES. Company and Placement Agent both acknowledge that it
would be extremely impractical and difficult to ascertain the actual damages to
be suffered by Company if Placement Agent is found by an arbitrator or a court
of competent jurisdiction to have breached any of the representations,
warranties and covenants contained in Section 13 of this instrument.
Accordingly, should a breach of the representations of Section 13 be proven and
Placement Agent found liable for said breach, Company and Placement Agent hereby
agree that the damages shall be fixed at no more than $100,000, inclusive of all
attorney's fees and cost of court. This provision is not to be construed as a
penalty, but as full liquidated damages under Georgia law.
10. EFFECTIVENESS OF AGREEMENT. This Agreement shall become effective (i)
at 9:00 A.M., Atlanta, Georgia time, on the date hereof or (ii) upon release by
the Placement Agent of the Private Equity Line Agreement for offering after the
date hereof, whichever occurs first. The Placement Agent agrees to notify the
Company immediately after the Placement Agent shall have taken any action by
such release or otherwise wherein this Agreement shall have become effective.
11. CONDITIONS OF THE PLACEMENT AGENT'S OBLIGATIONS. The Placement Agent's
obligations to act as agent of the Company hereunder and to find purchasers for
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the Private Equity Line Agreement shall be subject to the accuracy, as of any
Closing Date, of the representations and warranties on the part of the Company
herein contained, to the fulfillment of or compliance by the Company with all
covenants and conditions hereof, and to the following additional conditions:
11.1 Counsel to the Placement Agent shall not have objected in writing or
shall not have failed to give his consent to the Offering Documents (which
objection or failure to give consent shall not have been done unreasonably).
11.2 The Placement Agent shall not have disclosed to the Company that the
Offering Documents, or any amendment thereof or supplement thereto, contains an
untrue statement of fact, which, in the opinion of counsel to the Placement
Agent, is material, or omits to state a fact, which, in the opinion of such
counsel, is material and is required to be stated therein, or is necessary to
make the statements therein, under the circumstances in which they were made,
not misleading.
11.3 Between the date hereof and any Closing Date, the Company shall not
have sustained any loss on account of fire, explosion, flood, accident, calamity
or any other cause of such character as would materially adversely affect its
business or property considered as an entire entity, whether or not such loss is
covered by insurance.
11.4 Except as set forth in the Disclosure Documents to the Private Equity
Line Agreement, during the time period between the date hereof and any Closing
Date, there shall be no litigation instituted or threatened against the Company,
and there shall be no proceeding instituted or threatened against the Company
before or by any federal or state commission, regulatory body or administrative
agency or other governmental body, domestic or foreign, wherein an unfavorable
ruling, decision or finding would materially adversely affect the business,
franchises, license, permits, operations or financial condition or income of the
Company considered as an entity.
11.5 Except as contemplated herein or as set forth in the Offering
Documents, during the period subsequent to the most recent financial statements
contained in the Offering Documents, if any, and prior to any Closing Date, the
Company (i) shall have conducted its business in all material respects in the
usual and ordinary manner as the same is being conducted as of the date hereof
and (ii) except in the ordinary course of business, the Company shall not have
incurred any liabilities or obligations (direct or contingent) or disposed of
any assets, or entered into any material transaction or suffered or experienced
any substantially adverse change in its condition, financial or otherwise. At
any Closing Date, the equity account of the Company shall be substantially the
same as reflected in the most recent balance sheet contained in the Offering
Documents except for reductions for matters discussed in the Private Equity Line
Agreement and without considering the proceeds from the sale of the Securities
other than as may be set forth in the Offering Documents.
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11.6 The authorization of the Securities by the Company and all proceedings
and other legal matters incident thereto and to this Agreement shall be
reasonably satisfactory in all material respects to counsel to the Placement
Agent, who shall have furnished the Placement Agent on any Closing Date with
such favorable opinion with respect to the sufficiency of all corporate
proceedings and other legal matters relating to this Agreement as the Placement
Agent may reasonably require, and the Company shall have furnished such counsel
such documents as he may have requested to enable him to pass upon the matters
referred to in this subparagraph.
11.7 The Company shall have furnished to the Placement Agent the opinion,
dated on any Closing Date, addressed to the Placement Agent, from counsel to the
Company, as required by the Private Equity Line Agreement in substantially the
form attached to the Private Equity Line Agreement as Exhibit D.
11.8 The Company shall have furnished to the Placement Agent a due
diligence back up certificate signed by the Chief Executive Officer and the
Chief Financial Officer of the Company (a copy of which is attached hereto as
Exhibit C), dated as of any Closing Date, to the effect that:
(i) the representations and warranties of the Company in this Agreement are
true and correct in all material respects at and as of any Closing Date (other
than representations and warranties which by their terms are specifically
limited to a date other than any such Closing Date), and the Company has
complied with all the agreements and has satisfied all the conditions on its
part to be performed or satisfied at or prior to any Closing Date;
(ii) the Company has carefully examined the Offering Documents, and any
amendments and supplements thereto, and, to the best of its knowledge, all
statements contained in the Offering Documents, and any amendments and
supplements thereto, are true and correct, and neither the Offering Documents,
nor any amendment or supplement thereto, includes any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein under the circumstances in which they
were made not misleading, and since the date hereof, there has occurred no event
required to be set forth in an amended or supplemented Offering Documents, which
has not been set forth; except as set forth in the Offering Documents, since the
respective dates as of which the periods for which the information is given in
the Offering Documents and prior to the date of such certificate, (a) there has
not been any material adverse change, financial and otherwise, in the affairs of
condition of the Company, and (b) except as disclosed in the Offering Documents,
the Company has not incurred any material liabilities, direct or contingent, or
entered into any material transactions, otherwise than in the ordinary course of
business; and
(iii) the Company has provided true and correct copies of all documents in
its possession or which it could obtain that were requested by Placement Agent
pursuant to any due diligence inquiry.
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12 TERMINATION.
12.1 This Agreement may be terminated by the Placement Agent by notice to
the Company in the event that the Company shall have failed or been unable to
comply with any of the material terms, conditions or provisions of this
Agreement on the part of the Company to be performed, complied or with fulfilled
within the respective times, if any, herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Placement Agent in writing. However, if any material breach by
Company can be cured within ten (10) business days, Placement Agent shall
provide Company such reasonable period to cure.
12.2 This Agreement may be terminated by the Company by notice to the
Placement Agent in the event that the Placement Agent shall have failed or been
unable to comply with any of the terms, conditions or provisions of this
Agreement on the part of the Placement Agent to be performed, complied with or
fulfilled within the respective times, if any, herein provided for, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Company in writing. However, if any material breach by
Placement Agent can be cured within ten (10) business days, Company shall
provide Placement Agent such ten (10) business days to cure.
12.3 This Agreement may be terminated by the Placement Agent by notice to
the Company at any time, if, in the reasonable, good faith judgment of the
Placement Agent, payment for and delivery of the Securities is rendered
impracticable or inadvisable because: (i) additional material governmental
restrictions not in force and effect on the date hereof shall have been imposed
upon trading in securities generally; (ii) a war or other national calamity
shall have occurred; or (iii) the condition of the market (either generally or
with reference to the sale of the Securities to be offered hereby) or the
condition of any matter affecting the Company or any other circumstance is such
that it would be undesirable, impracticable or inadvisable, in the judgment of
the Placement Agent, to proceed with this Agreement or with the Offering.
12.4 Any termination of this Agreement pursuant to this Section 12 shall be
without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party thereto,
except that the Company shall remain obligated to pay the costs and expenses
provided to be paid by it specified in Sections 3 and 5; and the Company and the
Placement Agent shall be obligated to pay, respectively, all losses, claims,
damages or liabilities, joint or several, under Section 8.1 in the case of the
Company and Section 8.2 in the case of the Placement Agent.
13. PLACEMENT AGENT'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Placement Agent represents and warrants to and agrees with
the Company that:
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13.1 The Placement Agent is a limited liability company duly organized and
existing under the laws of the state of Georgia. The Placement Agent is an OSJ
branch office of Dunwoody Brokerage Services, Inc., a licensed NASD
broker-dealer, and a member of SIPC.
13.2 There is not now pending or threatened or to the Placement Agent's
knowledge, contemplated against the Placement Agent any action or proceeding of
which the Placement Agent has been advised, either in any court of competent
jurisdiction, before the Commission or before any state securities commission or
the NASD, concerning the Placement Agent's activities which would impair the
ability of the Placement Agent to conduct the Offering as contemplated by this
Agreement.
13.3 In the event any action or proceeding of the type referred to in
Section 13.2 above shall be instituted or threatened against the Placement Agent
at any time prior to any Closing Date or, in the event there shall be filed by
or against the Placement Agent in any court, pursuant to any federal, state,
local or municipal statute, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of its assets or
if the Placement Agent makes an assignment for the benefit of creditors, the
Company shall have the right, on three (3) days' written notice to the Placement
Agent, to terminate this Agreement without any liability to the Placement Agent
of any kind, except for the payment of all expenses provided herein.
13.4 Placement Agent understands and acknowledges that prior to issuance,
the Private Equity Line Agreement is not being registered under the Act, and
that the Offering is to be conducted pursuant to Regulation D under the
Securities Act of 1933, as amended, (the "Act"). Accordingly, in conducting its
activities under this Agreement:
(a) Placement Agent has not offered or sold and will not offer or sell the
Private Equity Line Agreement to any investor which Placement Agent does not
have reasonable grounds to believe, or does not believe, is an "Accredited
Investor," within the meaning of Regulation D under the Act.
(b) Placement Agent has not, nor has any person or entity acting on its
behalf, conducted or will conduct any general solicitation (as that term is used
in Rule 502(c) of Regulation D) or general advertising with respect to the
Private Equity Line Agreement.
(c) Placement Agent will not solicit or accept the subscription of any
person unless immediately before accepting such subscription Placement Agent has
reasonable grounds to believe and does believe that (i) such person is an
Accredited Investor and (ii) all representations made and information furnished
by such person in the Private Equity Line Agreement and related documents are
true and correct in all material respects.
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(d) Placement Agent will not solicit any purchasers of the Private Equity
Line Agreement unless the Offering Documents are furnished to such prospective
purchaser.
(e) Upon notice from the Company that the Offering Documents are required
to be amended or supplemented, Placement Agent will immediately cease use of the
Offering Documents until Placement Agent has received such amendment or
supplement and thereafter will make use of the Offering Documents only as so
amended or supplemented, and Placement Agent will deliver a copy of such
amendment or supplement to each prospective investor to whom a copy of the
Offering Documents had previously been delivered (and who has not returned such
copy).
(f) Placement Agent will use its best efforts to conduct the offering of
the Private Equity Line Agreement in a manner that will allow the availability
of the private offering exemption from federal securities regulation provided by
Regulation D promulgated under the Securities Act of 1933, as amended.
(g) Placement Agent will notify the Company in writing promptly when any
event shall have occurred during the Offering Period as a result of which any
representation or warranty of the Placement Agent herein would not be true.
13.5 Neither the Placement Agent nor any of its Affiliates will take any
action which will impair the effectiveness of the transactions contemplated by
this Agreement.
13.6 All corporate actions by Placement Agent required for the execution,
delivery and performance of this Agreement have been taken. The execution and
delivery of this Agreement by the Placement Agent, the observance and
performance thereof, and the consummation of the transactions contemplated
herein or in the Offering Documents do not and will not constitute a material
breach of, or a material default under, any instrument or agreement by which the
Placement Agent is bound, and does not and will not, to the best of the
Placement Agent's knowledge, contravene any existing law, decree or order
applicable to it. This Agreement constitutes a valid and binding agreement of
Placement Agent, enforceable in accordance with its terms.
13.7 Placement Agent understands that the Company is relying upon Placement
Agent's representations and warranties in connection with the Offering and the
sale of the Private Equity Line Agreement contemplated by this Agreement.
13.8 Placement Agent's representations and warranties under this Section 13
shall be true and correct as of any Closing, and shall survive such Closing.
13.9 Upon closing of the Offering and with the Company's prior written
approval for each such service to be provided, Placement Agent agrees to provide
the
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following services (the "PLUS Package Aftermarket Services") for a period of one
(1) year following the date hereof (service may be provided for periods
following one (1) year subject to subsequent agreement between Company and
Placement Agent); provided, however, that Placement Agent, in its discretion,
may discontinue providing the PLUS Package Aftermarket Services if there is a
material adverse change to the Company's fundamentals or business prospects
after the date hereof.
1) Analyst Coverage and Reporting.
Placement Agent's analyst will prepare a full-scale research report
("Analyst Report") on the Company which is expected to include the
following:
- Company's Technology
- Company's Target Market
- Industry overview
- Business plan & strategy
- Competitors
- Current contracts
- 3rd Party Partners
- Company Management and Board
The Analyst Report will be prepared following the Offering and will be
updated at least quarterly thereafter.
2) Identification of Target Institutions to Distribute Analyst Coverage.
Placement Agent will identify a minimum of twenty five (25)
institutional buy-side equity investors (together with the private
equity investors in the Offering, referred to as the "Target Affinity
Group") which have orientation toward the Company's specific industry
and/or small capitalization equity securities. Placement Agent will
contact the institutional investment manager of each member of the
Target Affinity Group and use its best efforts to get each to agree to
participate in the "PLUS" program. Placement Agent will thereafter
distribute its Analyst Report to the participating Target Affinity
Group, including all Analyst Report updates.
3) Quarterly Institutional Conference Calls.
Placement Agent will arrange and conduct Quarterly (post earnings)
conference calls between the Target Affinity Group and the Company
regarding the Company's progress and future prospects. Placement Agent
will bear the telephone expense of such conference calls.
4) Annual Investor Conference.
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Placement Agent will arrange and conduct a New York based investor
conference to highlight the Company to the Target Affinity Group and
other institutional equity investors who have interest in attending the
Company presentation. The investor conference will be arranged by
Placement Agent approximately twelve (12) months after the Offering.
Placement Agent will make all arrangements, organize the event, contact
and make invitations to targeted participants and provide support
personnel at the event. The Company will be responsible for the
expenses of all accommodations and conference facilities as well as
travel and lodging expenses for Company during conference.
5) Competitive/Industry Tracking and Alert Service.
Placement Agent will identify Company's top three publicly traded
competitors and will use reasonable efforts to provide timely "Fax
Alerts" to a person designated by Company highlighting significant
announcements by competition and of significant industry related news.
6) "PLUS - ONLINE" Services.
(i) Internet Site. Placement Agent will provide an internet based
on-line system which will provide access to the Target Affinity Group
and others designated by the Company (as agreed between Placement Agent
and Company) of the following Company related information:
- Company overview/slideshow presentation
- A full motion video of the Company's overview
- Placement Agent Analyst Report coverage including quarterly updates
- A chronological archive of the Company's press releases
- Video/voice Archive of Company's quarterly earnings conference call
presentations
- A full motion video "Virtual Roadshow" or "Factory Tour" - 10Q and
10K documents
Placement Agent will bear expense of the on-line internet system and
uploading/maintenance of all textual and static graphics materials.
Company will bear the expense and determine the extent of the
full-motion video based presentation material to be included in the
on-line presentations.
(ii) E-mail Connectivity. The on-line internet system will include
electronic mail functions between Company management, Placement Agent
personnel and the participating "PLUS" Program members.
14. COMPANY ACKNOWLEDGMENTS.
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14.1 Company understands and acknowledges that each of the Investors, in
their sole discretion, may elect to hold the Securities for various periods of
time, as provided in the Offering Documents, and the Company further
acknowledges that Placement Agent makes no representations or warranties as to
how long the Securities will be held by each Investor or the Investors' trading
history or investment strategies.
14.2 The number of Additional Shares, as defined in the Registration Rights
Agreement, that the Company may be obligated to issue may increase substantially
in certain circumstances, including the circumstance in which the trading price
of the Common Stock declines. The Company's executive officers and directors
have studied and fully understand the nature of this Agreement and the
Securities being sold hereunder and recognize that they have a potential
dilutive effect. The board of directors of the Company has concluded in its good
faith business judgment that such issuance is in the best interests of the
Company.
14.3 Company understands that there is no assurance as to how the market
and/or market makers will respond to the private placement structure.
14.4 Company acknowledges that Placement Agent has not made (either
directly or through any agent or representative) any representations, warranties
or covenants contrary to sections 14.1 through 14.3 and that Placement Agent has
disclosed the risks inherent in the structure of the Offering including, without
limitation, risks associated with the activities contemplated in sections 14.1
through 14.3.
14.5 Company acknowledges that due to the possible issuance of Additional
Shares pursuant to the Registration Rights Agreement, an issuance of more than
twenty percent (20%) of the outstanding Common Stock of Company could occur.
14.6 Company acknowledges that this Offering will not be deemed to be
integrated with any prior placement of securities by the Company under Rule 502
of the Securities Act of 1933 or other applicable law.
15. NOTICES. Except as otherwise expressly provided in this Agreement:
15.1 Whenever notice is required by the provisions of this Agreement to be
given to the Company, such notice shall be in writing, addressed to the Company,
at:
IF TO COMPANY: Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Viragen, Inc.
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO: Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
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Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson, PA
New River Center, Suite 1900
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇.
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
15.2 Whenever notice is required by the provisions of this Agreement to be
given to the Placement Agent, such notice shall be given in writing, addressed
to the Placement Agent, at:
IF TO THE PLACEMENT AGENT: Attn: ▇▇▇▇ ▇▇▇▇▇▇, President
▇▇▇▇▇▇ Investments, LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO: Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Dunwoody Brokerage Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
16. MISCELLANEOUS.
16.1 Benefit. This Agreement is made solely for the benefit of the
Placement Agent and the Company, their respective officers and directors and any
controlling person referred to in Section 15 of the Act and their respective
successors and assigns, and no other person may acquire or have any right under
or by virtue of this Agreement, including, without limitation, the holders of
any Securities. The term "successor" or the term "successors and assigns" as
used in this Agreement shall not include any purchasers, as such, of any of the
Securities.
16.2 Survival. The respective indemnities, agreements, representations,
warranties, covenants and other statements of the Company and the Placement
Agent, or the officers, directors or controlling persons of the Company and the
Placement Agent as set forth in or made pursuant to this Agreement and the
indemnity agreements of the Company and the Placement Agent shall survive and
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company or the Placement Agent or any such officer, director or
controlling person of the Company or of the Placement Agent; (ii) delivery of or
payment for the Securities; or (iii)
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any Closing Date, and any successor of the Company or the Placement Agent or any
controlling person, officer or director thereof, as the case may be, shall be
entitled to the benefits hereof.
16.3 Governing Law, Jurisdiction and Arbitration. The validity,
interpretation and construction of this Agreement and of each party hereof will
be governed by the Laws of the State of Delaware. Any controversy or claim
arising out of or related to this Agreement or the breach thereof, shall be
settled by binding arbitration in Wilmington, Delaware in accordance with the
Expedited Procedures (Rules 53-57) of the Commercial Arbitration Rules of the
American Arbitration Association (AAA). A proceeding shall be commenced upon
written demand by Company or any Holder to the other. The arbitrator(s) shall
enter a judgment by default against any party which fails or refuses to appear
in any properly noticed arbitration proceeding. The proceeding shall be
conducted by one (1) arbitrator, unless the amount alleged to be in dispute
exceeds two hundred fifty thousand dollars ($250,000), in which case three (3)
arbitrators shall preside. The arbitrator(s) will be chosen by the parties from
a list provided by the AAA, and if they are unable to agree within ten (10)
days, the AAA shall select the arbitrator(s). The arbitrators must be experts in
securities law and financial transactions. The arbitrators shall assess costs
and expenses of the arbitration, including all attorneys' and experts' fees, as
the arbitrators believe is appropriate in light of the merits of parties'
respective positions in the issues in dispute. The award of the arbitrator(s)
shall be final and binding upon the parties and may be enforced in any court
having jurisdiction. The arbitration shall be held in such place as set by the
arbitrator(s) in accordance with Rule 55.
16.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
16.5 Confidential Information. All confidential financial or business
information (except publicly available or freely usable material otherwise
obtained from another source) respecting either party will be used solely by the
other party in connection with the within transactions, be revealed only to
employees or contractors of such other party who are necessary to the conduct of
such transactions, and be otherwise held in strict confidence.
16.6 Public Announcements. Neither party hereto will issue any public
announcement concerning the within transactions without the review and comment
of the other party. The Placement Agent shall have the right to review and
comment upon any press release issued by the Company in connection with the
Offering.
16.7 [Intentionally Left Blank].
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16.8 Recitals. The recitals to this Agreement are a material part hereof,
and each recital is incorporated into this Agreement by reference and made a
part of this Agreement.
16.9 Capitalized Terms. Unless otherwise specified, capitalized terms used
herein shall have the meaning given to them in the Private Equity Line
Agreement.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly caused this Placement
Agent Agreement to be executed as of the day and year first above written.
"THE COMPANY"
VIRAGEN, INC.
By: _______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Exec. VP/CFO
"THE PLACEMENT AGENT"
▇▇▇▇▇▇ INVESTMENTS, LLC
d/b/a ▇▇▇▇▇▇ INSTITUTIONAL FINANCE
By: _______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
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Exhibit (10)(LXII).05
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH UNDER THAT CERTAIN REGULATION D COMMON
STOCK EQUITY LINE SUBSCRIPTION AGREEMENT BY AND BETWEEN THE COMPANY AND HOLDER
REFERENCED THEREIN AS EXHIBIT J.
Warrant to Purchase
"N" shares
------
WARRANT TO PURCHASE COMMON STOCK
OF
VIRAGEN, INC.
THIS CERTIFIES that ▇▇▇▇▇▇ Investments LLC d/b/a ▇▇▇▇▇▇ Institutional
Finance or any subsequent holder hereof ("Holder"), has the right to purchase
from VIRAGEN, INC., a Delaware corporation (the "Company"), up to "N" fully paid
and nonassessable shares, wherein "N" is defined in Section 3.5 of that certain
Placement Agent Agreement by and between the Company and Holder of even date
herewith, of the Company's common stock, $.01 par value per share ("Common
Stock"), subject to adjustment as provided herein, at a price equal to the
Exercise Price as defined in Section 3 below, at any time beginning on the Date
of Issuance (defined below) and ending at 5:00 p.m., New York, New York time, on
_____________ ___, 20__ (the "Exercise Period"). Within ten (10) days of the
date of any Six Month Anniversary, as defined in the Subscription Agreement, the
Company shall provide written confirmation to the Holder of the number of shares
of Common Stock, as adjusted if applicable, which the Holder has the right to
purchase hereunder.
Holder agrees with the Company that this Warrant to Purchase Common Stock
of Viragen, Inc. (this "Warrant") is issued and all rights hereunder shall be
held subject to all of the conditions, limitations and provisions set forth
herein.
1. Date of Issuance.
This Warrant shall be deemed to be issued on _____________ ___, 19__ ("Date
of Issuance").
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this Warrant may be
exercised as to all or any lesser number of full shares of Common Stock covered
hereby (the "Warrant Shares") upon surrender of this Warrant, with the Exercise
Form attached hereto as Exhibit A (the "Exercise Form") duly completed and
executed, together with
81
the full Exercise Price (as defined below) for each share of Common Stock as to
which this Warrant is exercised, at the office of the Company, Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Executive VP/CFO, ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇, or at such
other office or agency as the Company may designate in writing, by overnight
mail, with an advance copy of the Exercise Form sent to the Company and its
Transfer Agent by facsimile (such surrender and payment of the Exercise Price
hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of
the date of delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as conferring upon Holder
any rights as a stockholder of the Company.
(e) Limitation on Exercise. Notwithstanding anything to the contrary
contained herein, this Warrant may not be exercised by the Warrant Holder to the
extent that, after giving effect to Warrant Shares to be issued pursuant to an
Exercise Form, the total number of shares of Common Stock deemed beneficially
owned by such Holder (other than by virtue of ownership of this Warrant, or
ownership of other securities that have limitations on the Holder's rights to
convert or exercise similar to the limitations set forth herein), together with
all shares of Common Stock deemed beneficially owned by the Holder's
"affiliates" (as defined in Rule 144 of the Securities Act) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") exists,
would exceed 9.9%; provided that (w) each Warrant Holder shall have the right at
any time and from time to time to reduce such percentage from 9.9% immediately
upon notice to the Company or in the event of a Change in Control Transaction,
as defined below, (x) each Warrant Holder shall have the right at any time and
from time to time to increase such percentage from 9.9% or otherwise waive in
whole or in part the restrictions of this Section 2(e) upon 61 days' prior
notice to the Company or immediately in the event of a Change in Control
Transaction, (y) each Warrant Holder can make subsequent adjustments pursuant to
(w) or (x) any number of times from time to time (which adjustment shall be
effective immediately if it results in a decrease in the percentage or shall be
effective upon 61 days' prior written notice or immediately in the event of a
Change in Control Transaction if it results in an increase in percentage) and
(z) each Warrant Holder may eliminate or reinstate this limitation at any time
and from time to time (which elimination will be effective upon 61 days' prior
notice and which reinstatement will be effective immediately). Without limiting
the foregoing, in the event of a Change in Control Transaction, any holder may
reinstate immediately (in whole or in part) the requirement that any increase in
the percentage be subject to 61 days' prior written notice, notwithstanding such
Change in Control Transaction, without imposing
2
82
such requirement on, or otherwise changing such Holder's rights with respect to,
any other Change in Control Transaction. For this purpose, any material
modification of the terms of a Change in Control Transaction will be deemed to
create a new Change in Control Transaction. A "Change in Control Transaction"
will be deemed to have occurred upon the earlier of the announcement or
consummation of a transaction or series of transactions involving (x) any
consolidation or merger of the Company with or into any other corporation or
other entity or person (whether or not the Company is the surviving
corporation), or any other corporate reorganization or transaction or series of
related transactions in which in excess of 50% of the Company's voting power is
transferred through a merger, consolidation, tender offer or similar
transaction, or (y) in excess of 50% of the Corporation's Board of Directors
consists of directors not nominated by the prior Board of Directors of the
Company, or (z) any person (as defined in Section 13(d) of the Exchange Act),
together with its affiliates and associates (as such terms are defined in Rule
405 under the Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power. The delivery of
an Exercise Form by the Warrant Holder shall be deemed a representation by such
Holder that it is in compliance with this paragraph. Notwithstanding anything in
this subsection (e), the exercise of this Warrant may only be deferred until
____________ ___, 20__.
3. Payment of Warrant Exercise Price.
The Exercise Price ("Exercise Price") shall equal $_________.
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), the "Market Price" shall be
defined as the average Closing Bid Price of the Common Stock
for the five (5) trading days prior to the Date of Exercise of
this Warrant (the "Average Closing Price"), as reported by the
National Association of Securities Dealers Automated Quotation
System ("Nasdaq") Small Cap Market, or if the Common Stock is
not traded on the Nasdaq Small Cap Market, the Average Closing
Price in any other over-the-counter market; provided, however,
that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such
exchange for the five (5) trading days prior to the date of
exercise of the Warrants. If the Common Stock is/was not
traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded
day shall be deemed to be the
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83
closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price on the National Market System ("NMS"), the New York Stock Exchange,
the Nasdaq Small Cap Market, or the OTC Bulletin Board, or if no longer traded
on the NMS, the New York Stock Exchange, the Nasdaq Small Cap Market, or the OTC
Bulletin Board, the "Closing Bid Price" shall equal the closing price on the
principal national securities exchange or the over-the-counter system on which
the Common Stock is so traded and, if not available, the mean of the high and
low prices on the principal national securities exchange or the National
Securities Exchange on which the Common Stock is so traded.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the exercise of
this Warrant constitutes "Registrable Securities" under that certain
Registration Rights Agreement dated on or about September ___, 1998 between the
Company and certain investors and, accordingly, has the benefit of the
registration rights pursuant to that agreement.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then Holder, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of
4
84
Common Stock which Holder shall be entitled to purchase upon Exercise of this
Warrant shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such recapitalization, reclassification or similar transaction, and
the Exercise Price shall be, in the case of an increase in the number of shares,
proportionally decreased and, in the case of decrease in the number of shares,
proportionally increased. The Company shall give Holder the same notice it
provides to holders of Common Stock of any transaction described in this Section
5(b).
(c) Distributions. If the Company shall at any time distribute for no
consideration to holders of Common Stock cash, evidences of indebtedness or
other securities or assets (other than cash dividends or distributions payable
out of earned surplus or net profits for the current or preceding years) then,
in any such case, Holder shall be entitled to receive, upon Exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which Holder would have been entitled to receive with respect to each such share
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board of Directors of the Company in its discretion) and the denominator of
which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exerciseable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have given
thirty (30) days notice to Holder hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the net effect of
increasing the Exercise Price. The number of shares of Common Stock subject
hereto shall increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or
5
85
assets shall be subject to adjustment from time to time in a manner and upon
terms as nearly equivalent as practicable to the provisions of this Section 5.
6
86
6. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be
issuable upon the Exercise of this Warrant, but on Exercise of this Warrant,
Holder may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise shall be the next higher number of shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted
therefor as herein above provided) as shall be sufficient for the Exercise of
this Warrant and payment of the Exercise Price. The Company covenants and agrees
that upon the Exercise of this Warrant, all shares of Common Stock issuable upon
such exercise shall be duly and validly issued, fully paid, nonassessable and
not subject to preemptive rights, rights of first refusal or similar rights of
any person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Regulation D and exempt from state registration under applicable state laws. The
Warrant and the Common Stock issuable upon the Exercise of this Warrant may not
be pledged, transferred, sold or assigned except pursuant to an effective
registration statement or an exemption to the registration requirements of the
Act and applicable state laws.
(b) Assignment. If Holder can provide the Company with reasonably
satisfactory evidence that the conditions of (a) above regarding registration or
exemption have been satisfied, Holder may sell, transfer, assign, pledge or
otherwise dispose of this Warrant, in whole or in part. Holder shall deliver a
written notice to Company, substantially in the form of the Assignment attached
hereto as Exhibit B, indicating the person or persons to whom the Warrant shall
be assigned and the respective number of warrants to be assigned to each
assignee. The Company shall effect the assignment within ten (10) days, and
shall deliver to the assignee(s) designated by Holder a Warrant or Warrants of
like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person other
than the Company and Holder any legal or equitable right, remedy or claim under
this Warrant and this Warrant shall be for the sole and exclusive benefit of the
Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Delaware, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
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87
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to the Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive VP/CFO, ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇. Notices or
demands pursuant to this Warrant to be given or made by the Company to or on
Holder shall be sufficiently given or made if sent by certified or registered
mail, return receipt requested, postage prepaid, and addressed, to the address
of Holder set forth in the Company's records, until another address is
designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
____ day of _____________, 19__.
VIRAGEN, INC.
By: __________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive VP/CFO
8
88
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: VIRAGEN, INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of VIRAGEN,
INC., a Delaware corporation (the "Company"), evidenced by the attached warrant
(the "Warrant"), and herewith makes payment of the exercise price with respect
to such shares in full, all in accordance with the conditions and provisions of
said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature
________________________________________________________________________
Print Name
________________________________________________________________________
Address
________________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
________________________________________________________________________
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89
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Common Stock of VIRAGEN, INC.,
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new registration of Warrant:
_______________________________________
Name
_______________________________________
Address
_______________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
_______________________________________________________________________________
90
Exhibit (10)(LXII).04
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH UNDER THAT CERTAIN REGULATION D COMMON
STOCK EQUITY LINE SUBSCRIPTION AGREEMENT BY AND BETWEEN THE COMPANY AND HOLDER
REFERENCED THEREIN AS EXHIBIT J.
Warrant to Purchase
"N" shares
------
WARRANT TO PURCHASE COMMON STOCK
OF
VIRAGEN, INC.
THIS CERTIFIES that ▇▇▇▇▇▇ Private Equity, LLC or any subsequent holder
hereof ("Holder"), has the right to purchase from VIRAGEN, INC., a Delaware
corporation (the "Company"), up to "N" fully paid and nonassessable shares,
wherein "N" is defined below, of the Company's common stock, $.01 par value per
share ("Common Stock"), subject to adjustment as provided herein, at a price
equal to the Exercise Price as defined in Section 3 below, at any time beginning
on the Date of Issuance (defined below) and ending at 5:00 p.m., New York, New
York time, on ___________ ___, 20___ (the "Exercise Period"); provided, that "N"
shall equal ten percent (10%) of the number of shares of Common Stock purchased
by the Holder pursuant to that certain Regulation D Common Stock Equity Line
Subscription Agreement (the "Subscription Agreement") by and between the Holder
and Company during the six (6) month period immediately preceding any Six Month
Anniversary as defined in the Subscription Agreement. Within ten (10) days of
any Six Month Anniversary, the Company shall provide written confirmation to the
Holder of the number of shares of Common Stock, as adjusted if applicable, which
the Holder has the right to purchase hereunder.
Holder agrees with the Company that this Warrant to Purchase Common Stock
of Viragen, Inc. (this "Warrant") is issued and all rights hereunder shall be
held subject to all of the conditions, limitations and provisions set forth
herein.
1. Date of Issuance.
This Warrant shall be deemed to be issued on ______________ ___, 19___
("Date of Issuance").
2. Exercise.
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(a) Manner of Exercise. During the Exercise Period, this Warrant may be
exercised as to all or any lesser number of full shares of Common Stock covered
hereby (the "Warrant Shares") upon surrender of this Warrant, with the Exercise
Form attached hereto as Exhibit A (the "Exercise Form") duly completed and
executed, together with the full Exercise Price (as defined below) for each
share of Common Stock as to which this Warrant is exercised, at the office of
the Company, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive VP/CFO, ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇, Telecopy No.
(▇▇▇) ▇▇▇-▇▇▇▇, or at such other office or agency as the Company may designate
in writing, by overnight mail, with an advance copy of the Exercise Form sent to
the Company and its Transfer Agent by facsimile (such surrender and payment of
the Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of
the date of delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as conferring upon Holder
any rights as a stockholder of the Company.
(e) Limitation on Exercise. Notwithstanding anything to the contrary
contained herein, this Warrant may not be exercised by the Warrant Holder to the
extent that, after giving effect to Warrant Shares to be issued pursuant to an
Exercise Form, the total number of shares of Common Stock deemed beneficially
owned by such Holder (other than by virtue of ownership of this Warrant, or
ownership of other securities that have limitations on the Holder's rights to
convert or exercise similar to the limitations set forth herein), together with
all shares of Common Stock deemed beneficially owned by the Holder's
"affiliates" (as defined in Rule 144 of the Securities Act) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") exists,
would exceed 9.9%; provided that (w) each Warrant Holder shall have the right at
any time and from time to time to reduce such percentage from 9.9% immediately
upon notice to the Company or in the event of a Change in Control Transaction,
as defined below, (x) each Warrant Holder shall have the right at any time and
from time to time to increase such percentage from 9.9% or otherwise waive in
whole or in part the restrictions of this Section 2(e) upon 61 days' prior
notice to the Company or immediately in the event of a Change in Control
Transaction, (y) each Warrant Holder can make subsequent adjustments pursuant to
(w) or (x) any number of times from time to time (which adjustment shall be
effective immediately if it results in a decrease in the percentage or shall be
effective upon 61 days' prior written notice or immediately in the event of a
Change in Control Transaction if it results in an increase in percentage) and
(z) each Warrant Holder may eliminate or reinstate this limitation at any time
and from time to time (which elimination will be effective upon 61 days' prior
notice and which
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reinstatement will be effective immediately). Without limiting the foregoing, in
the event of a Change in Control Transaction, any holder may reinstate
immediately (in whole or in part) the requirement that any increase in the
percentage be subject to 61 days' prior written notice, notwithstanding such
Change in Control Transaction, without imposing such requirement on, or
otherwise changing such Holder's rights with respect to, any other Change in
Control Transaction. For this purpose, any material modification of the terms of
a Change in Control Transaction will be deemed to create a new Change in Control
Transaction. A "Change in Control Transaction" will be deemed to have occurred
upon the earlier of the announcement or consummation of a transaction or series
of transactions involving (x) any consolidation or merger of the Company with or
into any other corporation or other entity or person (whether or not the Company
is the surviving corporation), or any other corporate reorganization or
transaction or series of related transactions in which in excess of 50% of the
Company's voting power is transferred through a merger, consolidation, tender
offer or similar transaction, or (y) in excess of 50% of the Corporation's Board
of Directors consists of directors not nominated by the prior Board of Directors
of the Company, or (z) any person (as defined in Section 13(d) of the Exchange
Act), together with its affiliates and associates (as such terms are defined in
Rule 405 under the Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power. The delivery of
an Exercise Form by the Warrant Holder shall be deemed a representation by such
Holder that it is in compliance with this paragraph. Notwithstanding anything in
this subsection (e), the exercise of this Warrant may only be deferred until
______________ ___, 20___.
3. Payment of Warrant Exercise Price.
The Exercise Price shall equal $_______ per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer; or
(ii) Cashless Exercise: subject to the next to the last sentence of this
Section 3, surrender of this Warrant at the principal office of the Company
together with notice of cashless election, in which event the Company shall
issue Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), the "Market Price" shall be
defined as the average closing bid price of the Common Stock
for the five (5) trading days prior to the Date of Exercise of
this Warrant (the "Average Closing Price"), as reported by the
National Association of Securities Dealers Automated Quotation
System ("Nasdaq") Small Cap Market, or if the Common Stock is
not traded on the Nasdaq Small Cap Market, the Average Closing
Price in any other over-the-counter market; provided, however,
that if the Common Stock is listed on a stock exchange, the
Market Price shall be the
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Average Closing Price on such exchange for the five (5)
trading days prior to the date of exercise of the Warrants. If
the Common Stock is/was not traded during the five (5) trading
days prior to the Date of Exercise, then the closing price for
the last publicly traded day shall be deemed to be the closing
price for any and all (if applicable) days during such five
(5) trading day period.
B = the Exercise Price.
Notwithstanding anything to the contrary contained herein, this Warrant may not
be exercised in a cashless exercise transaction if, on the Date of Exercise, the
shares of Common Stock to be issued upon exercise of this Warrant would upon
such issuance (x) be immediately transferable in the United States free of any
restrictive legend, including without limitation under Rule 144; (y) be then
registered pursuant to an effective registration statement filed pursuant to
that certain Registration Rights Agreement dated on or about September ___, 1998
by and among the Company and certain investors; or (z) otherwise be registered
under the Securities Act of 1933, as amended.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the exercise of
this Warrant constitutes "Registrable Securities" under that certain
Registration Rights Agreement dated on or about September ___, 1998 between the
Company and certain investors and, accordingly, has the benefit of the
registration rights pursuant to that agreement.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then Holder, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that
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the shares of Common Stock shall be changed into or become exchangeable for a
larger or smaller number of shares, then upon the effective date thereof, the
number of shares of Common Stock which Holder shall be entitled to purchase upon
Exercise of this Warrant shall be increased or decreased, as the case may be, in
direct proportion to the increase or decrease in the number of shares of Common
Stock by reason of such recapitalization, reclassification or similar
transaction, and the Exercise Price shall be, in the case of an increase in the
number of shares, proportionally decreased and, in the case of decrease in the
number of shares, proportionally increased. The Company shall give Holder the
same notice it provides to holders of Common Stock of any transaction described
in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute for no
consideration to holders of Common Stock cash, evidences of indebtedness or
other securities or assets (other than cash dividends or distributions payable
out of earned surplus or net profits for the current or preceding years) then,
in any such case, Holder shall be entitled to receive, upon Exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which Holder would have been entitled to receive with respect to each such share
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board of Directors of the Company in its discretion) and the denominator of
which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exerciseable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have given
thirty (30) days notice to Holder hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the net effect of
increasing the Exercise Price. The number of shares of Common Stock subject
hereto shall increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to
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shares of Common Stock shall be deemed to refer to and include such shares
and/or other securities or assets; and thereafter the number of such shares
and/or other securities or assets shall be subject to adjustment from time to
time in a manner and upon terms as nearly equivalent as practicable to the
provisions of this Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be
issuable upon the Exercise of this Warrant, but on Exercise of this Warrant,
Holder may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise shall be the next higher number of shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted
therefor as herein above provided) as shall be sufficient for the Exercise of
this Warrant and payment of the Exercise Price. The Company covenants and agrees
that upon the Exercise of this Warrant, all shares of Common Stock issuable upon
such exercise shall be duly and validly issued, fully paid, nonassessable and
not subject to preemptive rights, rights of first refusal or similar rights of
any person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Regulation D and exempt from state registration under applicable state laws. The
Warrant and the Common Stock issuable upon the Exercise of this Warrant may not
be pledged, transferred, sold or assigned except pursuant to an effective
registration statement or an exemption to the registration requirements of the
Act and applicable state laws.
(b) Assignment. If Holder can provide the Company with reasonably
satisfactory evidence that the conditions of (a) above regarding registration or
exemption have been satisfied, Holder may sell, transfer, assign, pledge or
otherwise dispose of this Warrant, in whole or in part. Holder shall deliver a
written notice to Company, substantially in the form of the Assignment attached
hereto as Exhibit B, indicating the person or persons to whom the Warrant shall
be assigned and the respective number of warrants to be assigned to each
assignee. The Company shall effect the assignment within ten (10) days, and
shall deliver to the assignee(s) designated by Holder a Warrant or Warrants of
like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person other
than the Company and Holder any legal or equitable right, remedy or claim under
this Warrant and this Warrant shall be for the sole and exclusive benefit of the
Company and Holder.
10. Applicable Law.
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This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Delaware, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to the Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive VP/CFO, ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇. Notices or
demands pursuant to this Warrant to be given or made by the Company to or on
Holder shall be sufficiently given or made if sent by certified or registered
mail, return receipt requested, postage prepaid, and addressed, to the address
of Holder set forth in the Company's records, until another address is
designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
______ day of ________________, 19___.
VIRAGEN, INC.
By: __________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive VP/CFO
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EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: VIRAGEN, INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of VIRAGEN,
INC., a Delaware corporation (the "Company"), evidenced by the attached warrant
(the "Warrant"), and herewith makes payment of the exercise price with respect
to such shares in full, all in accordance with the conditions and provisions of
said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature
________________________________________________________________________
Print Name
________________________________________________________________________
Address
________________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
________________________________________________________________________
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EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Common Stock of VIRAGEN, INC.,
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new registration of Warrant:
_______________________________________
Name
_______________________________________
Address
_______________________________________
Please print name and address of assignee
(including zip code number)
________________________________________________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
________________________________________________________________________